-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ok606HF7tfxUSxQVOQUW5HibqvmmWbBFAjgRVt8J4cK15zV0Q+LVE5nqFw2dDHxk lK0oTXSfbNGevyOYWBUyjA== 0001086844-01-000004.txt : 20010223 0001086844-01-000004.hdr.sgml : 20010223 ACCESSION NUMBER: 0001086844-01-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRGATE PCS INC /DE/ CENTRAL INDEX KEY: 0001086844 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 582422929 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27455 FILM NUMBER: 1539339 BUSINESS ADDRESS: STREET 1: 233 PEACHTREE ST NE STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4045257272 MAIL ADDRESS: STREET 1: 233 PEACHTREE ST STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30303 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED DECEMBER 31, 2000. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 027455 AIRGATE PCS, INC. ----------------- (Exact name of registrant as specified in its charter) ------------------------- Delaware 58-2422929 -------- ---------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) Harris Tower, 233 Peachtree St. NE, Suite 1700, Atlanta, Georgia 30303 (Address of principal executive offices) (Zip code) ---------------------------------------- ---------- Registrant's telephone number, including area code (404) -------------------------- 525-7272 ------ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes __X___ No ____ - 13,066,698 shares of common stock, $0.01 par value per share, were outstanding as of February 12, 2001. AIRGATE PCS, INC. FIRST QUARTER REPORT Table of Contents PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (unaudited) at December 31, 2000 and September 30, 2000 Consolidated Statements of Operations (unaudited) for the three months ended December 31, 2000 and 1999 Consolidated Statements of Cash Flows (unaudited) for the three months ended December 31, 2000 and 1999 Notes to the Consolidated Financial Statements (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS AIRGATE PCS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands, except share and per share amounts)
December 31, September 30, 2000 2000 -------------- --------------- ASSETS Current assets: Cash and cash equivalents. . . . . . . . . . . . . . . . $ 52,465 $ 58,384 Trade receivables, net . . . . . . . . . . . . . . . . . 19,549 8,696 Inventory. . . . . . . . . . . . . . . . . . . . . . . . 3,295 2,902 Prepaid expenses . . . . . . . . . . . . . . . . . . . . 3,576 2,106 Other current assets . . . . . . . . . . . . . . . . . . 2,640 2,227 -------------- --------------- Total current assets . . . . . . . . . . . . . . . . . 81,525 74,315 Property and equipment, net. . . . . . . . . . . . . . . . 187,529 183,581 Financing costs. . . . . . . . . . . . . . . . . . . . . . 8,912 9,098 Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,798 1,954 -------------- --------------- $ 280,764 $ 268,948 ============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . $ 3,557 $ 21,009 Accrued expenses . . . . . . . . . . . . . . . . . . . . 10,963 9,548 Payable to Sprint PCS. . . . . . . . . . . . . . . . . . 15,829 5,292 Deferred revenue . . . . . . . . . . . . . . . . . . . . 3,191 1,828 -------------- --------------- Total current liabilities. . . . . . . . . . . . . . . 33,540 37,677 Deferred revenue . . . . . . . . . . . . . . . . . . . . . 1,318 671 Long-term debt . . . . . . . . . . . . . . . . . . . . . . 229,057 180,727 -------------- --------------- Total liabilities. . . . . . . . . . . . . . . . . . . 263,915 219,075 -------------- --------------- Stockholders' equity: Preferred stock, par value, $.01 per share; 5,000,000 shares authorized; no shares issued and outstanding . . . . . . . . . . . . . . . . - - Common stock, par value, $.01 per share; 150,000,000 shares authorized; 12,861,526 and 12,816,783 shares issued and outstanding at December 31, 2000 and September 30, 2000, respectively 129 128 Additional paid-in capital . . . . . . . . . . . . . . . 162,081 161,575 Accumulated deficit. . . . . . . . . . . . . . . . . . . (142,440) (108,577) Unearned stock option compensation . . . . . . . . . . . (2,921) (3,253) -------------- --------------- Total stockholders' equity . . . . . . . . . . . . . . 16,849 49,873 Commitments and contingencies -------------- --------------- $ 280,764 $ 268,948 ============== ===============
See accompanying notes to consolidated financial statements AIRGATE PCS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (dollars in thousands, except share and per share amounts)
Three Months Ended December 31, 2000 1999 -------------- ------------ Revenues: Service revenue . . . . . . . . . $ 12,284 $ - Roaming revenue . . . . . . . . . 7,388 130 Equipment revenue . . . . . . . . 2,290 - -------------- ------------ Total revenues. . . . . . . . . 21,962 130 Operating expenses: Cost of service and roaming . . . (15,913) (2,918) Cost of equipment . . . . . . . . (5,072) - Selling and marketing . . . . . . (16,678) (1,133) General and administrative. . . . (4,709) (1,488) Noncash stock option compensation (332) (404) Depreciation and amortization . . (6,662) (518) -------------- ------------ Operating loss. . . . . . . . . (27,404) (6,331) Interest income . . . . . . . . . . 1,289 3,470 Interest expense. . . . . . . . . . (7,748) (6,967) -------------- ------------ Net loss. . . . . . . . . . . . $ (33,863) $ (9,828) ============== ============ Basic and diluted net loss per share of common stock . . . . . . $ (2.64) $ (0.82) ============== ============ Weighted-average outstanding common shares . . . . . . . . . . 12,835,296 11,967,009 ============== ============
See accompanying notes to consolidated financial statements AIRGATE PCS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands)
Three Months Ended December 31, 2000 1999 -------------------- --------- Cash flows from operating activities: Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . $ (33,863) $ (9,828) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization . . . . . . . . . . . . . 6,662 518 Amortization of financing costs . . . . . . . . . . . . 303 285 Provision for doubtful accounts . . . . . . . . . . . . 1,057 -- Interest expense associated with accretion of discount and beneficial conversion feature . . . . 6,330 5,577 Stock option compensation . . . . . . . . . . . . . . . 332 404 (Increase) decrease in: Trade receivables, net. . . . . . . . . . . . . . . . (11,910) -- Inventory . . . . . . . . . . . . . . . . . . . . . . (393) (241) Prepaid expenses. . . . . . . . . . . . . . . . . . . (1,470) (633) Other current assets. . . . . . . . . . . . . . . . . (413) (1,439) Other assets. . . . . . . . . . . . . . . . . . . . . (844) (11) Increase (decrease) in: Accounts payable. . . . . . . . . . . . . . . . . . . (3,675) 3,364 Accrued expenses. . . . . . . . . . . . . . . . . . . 2,770 (2,068) Payable to Sprint PCS . . . . . . . . . . . . . . . . 10,537 -- Deferred revenue. . . . . . . . . . . . . . . . . . . 2,010 -- -------------------- -------- Net cash used in operating activities . . . . . . . (22,567) (4,072) -------------------- --------- Cash flows from investing activities: Capital expenditures. . . . . . . . . . . . . . . . . . . . (25,858) (38,199) -------------------- --------- Net cash used in investing activities . . . . . . . (25,858) (38,199) -------------------- --------- Cash flows from financing activities: Proceeds from Lucent Financing. . . . . . . . . . . . . . . 42,000 -- Payment on notes payable to Sprint PCS. . . . . . . . . . . -- (7,700) Proceeds from exercise of employee common stock options . . 506 -- -------------------- -------- Net cash provided by (used in) financing activities 42,506 (7,700) -------------------- --------- Net decrease in cash and cash equivalents . . . . . (5,919) (49,971) Cash and cash equivalents at beginning of period. . . . . . . 58,384 258,900 -------------------- --------- Cash and cash equivalents at end of period. . . . . . . . . . $ 52,465 $208,929 ==================== ========= Supplemental disclosure of cash flow information - cash paid for interest. . . . . . . . . . . . . . . . . . . $ 1,502 $ 1,696 ==================== ========= Supplemental disclosure of noncash investing and financing activities: Capitalized interest. . . . . . . . . . . . . . . . . . . 762 1,609 Notes payable and accrued interest converted to equity. . -- 102 Grant of compensatory stock options . . . . . . . . . . . -- 1,600 Network assets acquired and not yet paid for. . . . . . . -- 11,906
See accompanying notes to consolidated financial statements AIRGATE PCS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 (unaudited) (1) Basis of Presentation The accompanying consolidated financial statements are unaudited and have been prepared by management. The consolidated financial statements included herein include the accounts of AirGate PCS, Inc. and its wholly-owned subsidiaries, AGW Leasing Company, Inc. ("AGW") and AirGate Network Services, LLC ("ANS") for all periods presented. In the opinion of management, these consolidated financial statements contain all of the adjustments, consisting of normal recurring adjustments, necessary to present fairly, in summarized form, the financial position and the results of operations of AirGate PCS, Inc. and its subsidiaries (collectively "AirGate" or the "Company"). The results of operations for the three months ended December 31, 2000 are not indicative of the results that may be expected for the full fiscal year of 2001. The financial information presented herein should be read in conjunction with the Company's Form 10-K for the year ended September 30, 2000 which includes information and disclosures not included herein. All significant intercompany accounts or balances have been eliminated in consolidation. Certain amounts have been reclassified to conform to the current year presentation. (2) Net Loss Per Share The Company computes net loss per common share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share". Basic and diluted net loss per share of common stock is computed by dividing net loss for each period by the weighted-average outstanding common shares. No conversion of common stock equivalents has been assumed in the calculation of diluted net loss per share since the effect would be antidilutive. As a result, the number of weighted-average outstanding common shares as well as the amount of net loss per share are the same for both the basic and diluted net loss per share calculations for all periods presented. The reconciliation of weighted-average outstanding common shares to weighted-average outstanding shares including potentially dilutive common stock equivalents is set forth below:
Three Months Ended December 31, 2000 1999 ------------ ---------- Weighted-average outstanding common shares 12,835,296 11,967,009 Weighted-average potentially dilutive common stock equivalents: Common stock options . . . . . . . . . 556,674 725,709 Stock purchase warrants. . . . . . . . 135,605 857,538 ------------ ---------- Weighted-average outstanding shares including potentially dilutive common stock equivalents. . . . . . . . . . . . 13,527,575 13,550,256 ============ ==========
AIRGATE PCS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 (unaudited) (3) Revenue Recognition The accounting policy for the recognition of activation fee revenue is to record the revenue over the periods such revenue is earned in accordance with the current interpretations of Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." Accordingly, activation fee revenue and direct customer activation cost has been deferred and is recorded either; over the average life for those customers (30 months) that do not sign an Advantage Agreement or the Advantage Agreement period (generally 12 months) for those customers that do sign an Advantage Agreement. For the three months ended December 31, 2000, the Company has recognized approximately $0.2 million of activation fee revenue and $0.2 million of direct customer activation cost and as of December 31, 2000 has deferred $2.4 million of activation fee revenue and $2.3 million of direct customer activation cost to future periods. (4) Trade Receivables, net Trade receivables, net, includes amounts due from Sprint PCS relating to roaming revenues, amounts from customers with respect to airtime service charges and amounts from local third party vendors relating to the sale of handsets and accessories. For the three months ended December 31, 2000, roaming revenues from Sprint PCS totaled $7.4 million, or 33% of total revenues. Of this amount, $5.1 million was recorded as accounts receivable at December 31, 2000. The Company records an allowance for doubtful accounts to reflect the expected loss on the collection of receivables. Such allowance is recorded for accounts receivables from customers and third party vendors and totaled $1.6 million at December 31, 2000. (5) Other Current Assets Other current assets consists of the following at December 31, 2000 and September 30, 2000 (dollars in thousands):
December 31, September 30, 2000 2000 ------------- -------------- Current portion of financing costs $ 1,215 $ 1,215 Direct customer activation costs . 1,102 627 Interest receivable and other. . . 323 385 ------------- -------------- Other current assets . . . . . . $ 2,640 $ 2,227 ============= ==============
(6) Property and Equipment, net Property and equipment consists of the following at December 31, 2000 and September 30, 2000 (dollars in thousands):
December 31, September 30, 2000 2000 -------------- --------------- Network assets. . . . . . . . . . . . . . . . . $ 173,662 $ 158,720 Computer equipment. . . . . . . . . . . . . . . 3,272 3,081 Furniture, fixtures, and office equipment . . . 9,791 6,800 -------------- --------------- 186,725 168,601 Less accumulated depreciation and amortization. (19,667) (13,005) -------------- --------------- 167,058 155,596 Construction in progress (network build-out). . 20,471 27,985 -------------- --------------- Property and equipment, net . . . . . . . . . $ 187,529 $ 183,581 ============== ===============
(7) Sprint Payable The Sprint payable consists of amounts owed to Sprint PCS related to purchases of handsets and accessories, services provided including customer care and customer billing, subsidy payable to third party national retailers and the 8% affiliation fee. At December 31, 2000, the amount payable to Sprint PCS totaled $15.8 million. (8) Long-Term Debt Long-term debt consists of the following at December 31, 2000 and September 30, 2000 (dollars in thousands):
December 31, September 30, 2000 2000 -------------- --------------- Lucent Financing: Gross borrowings . . . . . . . . . . $ 55,500 $ 13,500 Unaccreted original issue discount . (722) (772) -------------- --------------- Net Lucent Financing . . . . . . . . . 54,778 12,728 Senior Subordinated Discount Notes: Outstanding borrowings . . . . . . . 183,859 177,852 Unaccreted original issue discount . (9,580) (9,853) -------------- --------------- Net Senior Subordinated Discount Notes 174,279 167,999 -------------- --------------- Long term debt . . . . . . . . . . . $ 229,057 $ 180,727 ============== ===============
AIRGATE PCS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 (unaudited) (9) Common Stock Purchase Warrants (a) Lucent Financing On June 1, 2000, the Company issued stock purchase warrants to Lucent Technologies in consideration of the Lucent Financing. The exercise price of the warrants equal $20.40 per share, and the warrants are exercisable for an aggregate of 10,175 shares of the Company's common stock at any time. The warrants expire on the earlier of August 15, 2004 or August 15, 2001, if as of such date, the Company has paid in full all outstanding amounts under the Lucent Financing and has terminated the remaining unused portion of the commitments under the Lucent Financing. The Company recorded a discount on the associated credit facility of $0.3 million which represents the fair value of the warrants on the date of grant using a Black-Scholes valuation. The discount will be recognized as interest expense over the period from the date of issuance to maturity using the effective interest method. All of these warrants remain outstanding at December 31, 2000. (b) Senior Subordinated Discount Notes On January 3, 2000, the Company's registration statement on Form S-1, relating to warrants to purchase 644,400 shares of common stock issued together, as units, with the Company's $300 million of 13.5% senior subordinated discount notes due 2009, was declared effective by the Securities and Exchange Commission. On September 30, 2000, the Company received gross proceeds of $156.1 million from the issuance of 300,000 units, each unit consisting of a $1,000 principal amount at maturity 13.5% senior subordinated discount note due 2009 and one warrant to purchase 2.148 shares of common stock at a price of $0.01 per share. The warrants are exercisable beginning upon the effective date of the registration statement registering such warrants, for an aggregate of 644,400 shares of common stock and expire October 1, 2009. As of December 31, 2000, warrants representing 512,884 shares of common stock had been exercised and warrants representing 131,516 shares of common stock remain outstanding. (10) Subsequent Events On February 2, 2001, our Vice President of New Business Development, W. Chris Blane and our Vice President of Sprint PCS Relationship, Robert E. Gourlay, terminated employment with the Company. Pursuant to the stock option agreements with Messrs. Blane and Gourlay, previously unvested stock options will vest, resulting in the company recording non-cash stock option compensation expense of $0.3 million in the three months ended March 31, 2001. (11) Condensed Consolidated Financial Information AGW Leasing Company, Inc. and AirGate Network Services LLC are wholly-owned subsidiaries of AirGate PCS, Inc. Both AGW and ANS have fully and unconditionally guaranteed the Company's senior subordinated discount notes and the Lucent Financing. Both AGW and ANS jointly and severably guarantee the Company's long-term debt. AGW was formed to hold the real estate interests for the Company's PCS network. ANS was formed to provide construction management services for the Company's PCS network. AGW also was a registrant under the Company's registration statement declared effective by the Securities and Exchange Commission on September 27, 1999. AIRGATE PCS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 (unaudited) The unaudited condensed consolidating financial information for AGW and ANS as of December 31, 2000 and for the three months then ended is as follows (dollars in thousands):
AGW Leasing AirGate AirGate PCS, Company, Network Inc. Inc. Services, LLC Eliminations Consolidated Cash and cash equivalents . . . . . . . . . $ 52,465 $ - $ - $ - $ 52,465 Trade receivables and other current assets. 29,060 - - - 29,060 Property and equipment, net . . . . . . . . 140,255 - 47,274 - 187,529 Other assets. . . . . . . . . . . . . . . . 76,005 - - (64,295) 11,710 -------------- ---------- --------------- -------------- -------------- Total assets. . . . . . . . . . . . . . $ 297,785 $ - $ 47,274 $ (64,295) $ 280,764 ============== ========== =============== ============== ============== Current liabilities . . . . . . . . . . . . 32,116 $ 14,591 $ 51,128 $ (64,295) $ 33,540 Long-term deferred revenue. . . . . . . . . 1,318 - - - 1,318 Long-term debt. . . . . . . . . . . . . . . 229,057 - - - 229,057 -------------- ---------- --------------- -------------- -------------- Total liabilities . . . . . . . . . . . 262,491 14,591 51,128 (64,295) 263,915 Common stock. . . . . . . . . . . . . . . . 129 - - - 129 Additional paid-in capital. . . . . . . . . 162,081 - - - 162,081 Accumulated deficit . . . . . . . . . . . . (123,995) (14,591) (3,854) - (142,440) Unearned stock option compensation. . . . . (2,921) - - - (2,921) -------------- ---------- --------------- -------------- -------------- Total liabilities and stockholders' equity(deficit). . . . . . . . . . . $ 297,785 $ - $ 47,274 $ (64,295) $ 280,764 ============== ========== =============== ============== ============== Total revenues. . . . . . . . . . . . . . . 21,962 $ - $ - $ - $ 21,962 Total expenses. . . . . . . . . . . . . . . (51,964) (3,458) (403) - (55,825) -------------- ---------- --------------- -------------- -------------- Net loss. . . . . . . . . . . . . . . . $ (30,002) $ (3,458) $ (403) $ - $ (33,863) ============== ========== =============== ============== ============== Operating activities, net . . . . . . . . . (25,839) - 3,272 - (22,567) Capital expenditures. . . . . . . . . . . . (22,838) - (3,020) - (25,858) Financing activities, net . . . . . . . . . 42,506 - - - 42,506 -------------- ---------- --------------- -------------- -------------- Decrease (increase) in cash and cash equivalents. . . . . . . . . . (6,171) - 252 - (5,919) Cash and cash equivalents at beginning of period. . . . . . . . . . 58,636 - (252) - 58,384 -------------- ---------- --------------- -------------- -------------- Cash and cash equivalents at end of period. $ 52,465 $ - $ - $ - $ 52,465 ============== ========== =============== ============== ==============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Statements contained herein regarding expected financial results and other planned events are forward-looking statements that involve risk and uncertainties. Actual future events or results may differ materially from these statements. Readers are referred to the documents filed by AirGate PCS, Inc. with the Securities and Exchange Commission, specifically the most recent filings which identify important investment considerations that could cause actual results to differ from those contained in the forward-looking statements, including potential fluctuations in quarterly results, our dependence on our affiliation with Sprint PCS, an adequate supply of infrastructure and subscriber equipment, dependence on new product development, rapid technological and market change, risks related to future growth and expansion, our significant level of indebtedness and volatility of stock prices. Certain of these risks are summarized under the caption "Investment Considerations" under Item 5 - Other Information of this quarterly report. OVERVIEW On July 22, 1998, we entered into a management agreement with Sprint PCS whereby we became the Sprint PCS affiliate with the exclusive right to provide 100% digital, 100% PCS services under the Sprint and Sprint PCS brand names in our territory in the southeastern United States. We completed our radio frequency design, network design and substantial site acquisition and cell site engineering, and commenced construction of our PCS network in November 1998. In January 2000 we began commercial operations with the launch of four markets covering 2.2 million residents in our Sprint PCS territory. By September 30, 2000, we had launched commercial PCS service in all of the 21 markets that comprise our Sprint PCS territory. At December 31, 2000, we provided Sprint PCS services to 103,440 subscribers. Sprint PCS has invested $44.6 million to purchase the PCS licenses in our territory and incurred additional expenses for microwave clearing. Under our long-term agreements with Sprint PCS, we manage the network on Sprint PCS' licensed spectrum as well as use the Sprint and Sprint PCS brand names royalty-free during our affiliation with Sprint PCS. We also have access to Sprint PCS' national marketing support and distribution programs and are entitled to buy network and subscriber equipment and handsets at the same discounted rates offered by vendors to Sprint PCS based on its large volume purchases. In exchange for these and other benefits, we are entitled to receive 92%, and Sprint PCS is entitled to retain 8%, of collected service revenues from customers in our Sprint PCS territory and roaming received from non-Sprint PCS customers. We are entitled to 100% of revenues collected from the sale of handsets and accessories and on roaming revenues received when Sprint PCS customers from a different territory make a wireless call on our PCS network. Through December 31, 2000, we have made $194.1 million of capital expenditures related to the build-out of our PCS network. We were able to open the network for a portion of our territory for roaming coverage along Interstate 85 between Atlanta, Georgia and Charlotte, North Carolina in November 1999. In the three months ended March 31, 2000, we launched commercial PCS operations in the Greenville-Spartanburg, Anderson and Myrtle Beach, South Carolina markets and the Hickory, Asheville, Wilmington and Rocky Mount, North Carolina markets. In the three months ended June 30, 2000, we launched commercial PCS operations in the Charleston, Columbia and Florence, South Carolina markets, the Augusta and Savannah, Georgia markets and the Goldsboro, Jacksonville, New Bern, Orangeburg, Roanoke Rapids and Greenville-Washington, North Carolina markets. In the three months ended September 30, 2000, we launched commercial PCS operations in the Greenwood and Sumter, South Carolina markets and the Outer Banks, North Carolina market. At December 31, 2000, our Sprint PCS network covered 5.6 million of the 7.1 million residents in our Sprint PCS territory based on 2000 U.S. Census Department data. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 1999: Customer Additions At December 31, 2000, we provided personal communication services to 103,440 customers, a net increase of 46,751 during the three months then ended, resulting from the commercial launch of 21 markets in the fiscal year 2000. At December 31, 1999, we had no customers. Average Revenue Per User (ARPU) An important operating metric in the wireless industry is Average Revenue Per User (ARPU) which summarizes the average monthly service revenue per customer, net of an allowance for doubtful accounts. For the three months ended December 31, 2000, our ARPU was $54. At December 31, 1999, the Company had no customers. Revenues Service revenue and equipment revenue were $12.3 million and $2.3 million, respectively, for the three months ended December 31, 2000. These revenues were the result of launching commercial operations in 21 markets during fiscal year 2000 and the related growth in customers. Service revenue consists of monthly recurring access and feature charges and monthly non-recurring charges for local, long distance, travel and roaming airtime usage in excess of the pre-subscribed usage plan. Equipment revenue is derived from the sale of handsets and accessories, net of an allowance for returns. Our handset return policy allows customers to return their handsets for a full refund within 14 days of purchase. When handsets are returned to us, we may be able to reissue the handsets to customers at little additional cost to us. However, when handsets are returned to Sprint PCS for refurbishing, we receive a credit from Sprint PCS, which is less than the amount we originally paid for the handset. Roaming revenue of $7.4 million was recorded during the three months ended December 31, 2000 compared to $0.1 million for the three months ended December 31, 1999, an increase of $7.3 million. We receive Sprint PCS roaming revenue at a per-minute rate from Sprint PCS or another Sprint PCS affiliate when Sprint PCS subscribers outside of our territory use our network. We also receive non-Sprint PCS roaming revenue when subscribers of other wireless service providers roam on our network. Cost of Service and Roaming The cost of service and roaming was $15.9 million for the three months ended December 31, 2000 compared to $2.9 million for the three months ended December 31, 1999, an increase of $13.0 million. Cost of service represents network operating costs (including salaries, cell site lease payments, fees related to data transfer via T-1 and other transport lines, inter-connect fees and other expenses related to network operations), roaming expense when AirGate customers place calls on other third party networks or a portion of the Sprint PCS network not owned by AirGate, back-office services provided by Sprint PCS such as customer care and billing, long distance expense relating to inbound roaming revenue and the 8% of collected service revenue representing the Sprint PCS affiliation fee. The Sprint PCS affiliation fee totaled $1.0 million in the three months ended December 31, 2000. At December 31, 1999, the Company's network consisted of 104 active cell sites and two switches. At December 31, 2000, the Company's network was built-out to 598 active cell sites and three switches. There were approximately 64 employees performing network operations functions at December 31, 2000 compared to 23 employees at December 31, 1999. Cost of Equipment Cost of equipment was $5.1 million for the three months ended December 31, 2000. We had not launched commercial operations as of December 31, 1999. Cost of equipment includes the cost of handsets and accessories sold to customers. The cost of handsets exceeds the price received from customers because we subsidize the price of handsets to remain competitive in the marketplace. Selling and Marketing We incurred expenses of $16.7 million during the three months ended December 31, 2000 for selling and marketing costs. These amounts include retail store costs such as salaries and rent in addition to promotion, advertising, commission costs, and handset subsidies on units sold by third parties for which we do not record revenue. These handsets subsidies totaled $3.3 million for the three month ended December 31, 2000. At December 31, 2000, there were approximately 264 employees performing sales and marketing functions compared to 58 employees at December 31, 1999. The three months ended December 31, 2000 includes the traditionally heavy holiday selling season (see "Seasonality" below). General and Administrative For the three months ended December 31, 2000, we incurred general and administrative expenses of $4.7 million compared to $1.5 million for the three months ended December 31, 1999, an increase of $3.2 million. The increase is primarily comprised of professional fees and compensation and benefits relating to growth in the number of employees. Of the 372 employees at December 31, 2000, approximately 44 employees were performing corporate support functions compared to 23 employees as of December 31, 1999. Noncash Stock Option Compensation Noncash stock option compensation expense was $0.3 million for the three months ended December 31, 2000, compared to $0.4 million for the three months ended December 31, 1999, a decrease of $0.1 million. The decrease relates to forfeited stock options from terminated employees. We apply the provisions of APB Opinion No. 25 and related interpretations in accounting for our stock option plan. Unearned stock option compensation is recorded for the difference between the exercise price and the fair market value of our common stock at the date of grant and is recognized as noncash stock option compensation expense in the period in which the related services are rendered. Depreciation and Amortization For the three months ended December 31, 2000, depreciation and amortization expense increased $6.2 million to $6.7 million compared to $0.5 million for the three months ended December 31, 1999. The increase in depreciation and amortization expense relates primarily to the completion of our initial network build-out during fiscal year 2000. Depreciation and amortization will continue to increase modestly as additional portions of our network are placed into service. We incurred capital expenditures of $10.6 million in the three months ended December 31, 2000 related to the continued build-out of our PCS network which included approximately $0.8 million of capitalized interest compared to capital expenditures of $33.9 million and capitalized interest of $1.6 million in three months ended December 31, 1999. Interest Income For the three months ended December 31, 2000, interest income was $1.3 million compared to $3.5 million for the three months ended December 31, 1999, a decrease of $2.2 million. The three months ended December 31, 1999 had higher cash and cash equivalent balances as proceeds from our September 1999 equity and debt offerings was just beginning to be used. As capital expenditures are required to complete the build-out of our PCS network and working capital and operating losses are funded, decreasing cash balances will result in lower interest income for the remainder of fiscal 2001. Interest Expense For the three months ended December 31, 2000, interest expense was $7.7 million, an increase of $0.7 million from the three months ended December 31, 1999. The increase is primarily attributable to increased debt related to accreted interest on the senior subordinated discount notes and increased borrowings under the Lucent Financing partially offset by lower commitment fees on undrawn balances of the Lucent Financing and lower capitalized interest. We had borrowings of $229.1 million at December 31, 2000 compared to $180.7 million at September 30, 2000 and $163.5 million at December 31, 1999. Net Loss For the three months ended December 31, 2000, the net loss was $33.9 million, an increase of $24.1 million over a net loss of $9.8 million for the three months ended December 31, 1999. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2000, the Company had $52.5 million in cash and cash equivalents, compared to $58.4 million in cash and cash equivalents at September 30, 2000. Working capital was $48.0 million at December 31, 2000 compared to working capital of $36.6 million at September 30, 2000. Net Cash Used In Operating Activities The $22.6 million of cash used in operating activities in the three months ended December 31, 2000 was the result of our $33.9 million net loss and a net $3.6 million of cash used in changes in working capital and other assets and liabilities being partially offset by $14.7 million of depreciation, amortization of note discounts, amortization of financing costs and noncash stock option compensation. Net Cash Used in Investing Activities The $25.9 million of cash used in investing activities represents cash outlays for capital expenditures during the three months ended December 31, 2000. We incurred a total of $10.6 million of capital expenditures in the three months ended December 31, 2000. Further, cash payments of $15.3 million were made for equipment purchases made through accounts payable and accrued expenses at September 30, 2000. Net Cash Used In Financing Activities The $42.5 million in cash provided by financing activities for the three months ended December 31, 2000 consisted of a $42.0 million borrowing under the Lucent Financing and $0.5 million of proceeds received from the exercise of options to purchase common stock by employees. Liquidity We closed our offerings of equity and debt funding on September 30, 1999 with net proceeds of $269.9 million. The senior subordinated discount notes due 2009 will require cash payments of interest beginning on April 1, 2005. Our $153.5 million credit agreement with Lucent provides for a $13.5 million senior secured term loan which matures on June 6, 2007, which is the first installment of the loan, or tranche I. The second installment, or tranche II, under the credit agreement with Lucent is for a $140.0 million senior secured term loan which matures on September 30, 2008. The credit agreement requires us to make quarterly payments of principal beginning December 31, 2002 for tranche I and March 31, 2004 for tranche II initially in the amount of 3.75% of the loan balance then outstanding and increasing thereafter. With the borrowing of at least 30% of the tranche II term loan, or $42 million, the commitment fee on unused borrowings decreases to 1.50%, payable quarterly. As of December 31, 2000, $98 million remained undrawn on our financing from Lucent. Our obligations under the credit agreement are secured by all of our assets. We expect that cash and cash equivalents together with future advances under the financing from Lucent will fund our capital expenditures and our working capital requirements through fiscal 2002 at which time we anticipate we will be operational cash flow positive. If any corporate development event such as an acquisition is effected, additional debt and/or equity capital may be needed. The financing with Lucent is subject to certain restrictive covenants including maintaining certain financial ratios, reaching defined subscriber growth and network covered population goals, and limiting annual capital expenditures. Further, the credit facility restricts the payment of dividends on our common stock. As of December 31, 2000, management believes that we are in compliance with all covenants governing our financing from Lucent. SEASONALITY Our business is subject to seasonality because the wireless industry is heavily dependent on fourth calendar quarter results (our fiscal first quarter). Among other things, the industry relies on significantly higher customer additions and handset sales in the fourth calendar quarter as compared to the other three calendar quarters. A number of factors contribute to this trend, including: the increasing use of retail distribution, which is heavily dependent upon the year-end holiday shopping season; the timing of new product and service announcements and introductions; competitive pricing pressures; and aggressive marketing and promotions. The increased level of activity requires a greater use of our available financial resources during this period. INFLATION Management believes that inflation has not had, and does not expect inflation to have, a material adverse effect on our results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For the three months ended December 31, 2000, we did not experience any material change in market risk exposures that affect the quantitative and qualitative disclosures presented in the Company's Annual Report on Form 10-K for the year ended September 30, 2000. In the normal course of business, our operations are exposed to interest rate risk on our financing from Lucent and any future financing requirements. Our fixed rate debt consists primarily of the accreted carrying value of the senior subordinated discount notes ($183.9 million at December 31, 2000). Our variable rate debt consists of borrowings made under the Lucent Financing ($55.5 million at December 31, 2000). Our primary interest rate risk exposures relate to (i) the interest rate on our financing form Lucent; (ii) our ability to refinance its senior subordinated discount notes at maturity at market rates; and (iii) the impact of interest rate movements on our ability to meet interest expense requirements and financial covenants under our debt instruments. We manage the interest rate risk on our outstanding long-term debt through the use of fixed and variable rate debt and expect in the future to use interest rate swaps. While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our interest rate risk on an ongoing basis. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On September 30, 1999, we completed the concurrent offerings of equity and debt funding with total net proceeds of approximately $269.9 million. In the period from September 30, 1999 to December 31, 2000, we have used $178.3 million to fund capital expenditures relating to the build-out of our PCS network and $7.7 million to repay indebtedness. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The company submitted to a vote of its stockholders of record as of December 11, 2000, through a solicitation by proxy, the election of two Class II directors and the approval of an employee stock purchase plan which is qualified under Section 423 of the Internal Revenue Code of 1986. The matters were submitted for a vote at our Annual Meeting of Stockholders on January 30, 2001. A total of 10,821,514 shares were represented by proxy at the meeting, representing 84.2% of the 12,846,526 shares eligible to vote. With respect to the election of two Class II directors, of the shares represented, 10,739,334 were voted in favor of the election of Robert A. Ferchat to serve as director for a new three year term, 82,180 shares were withheld and 10,540,805 were voted in favor of the election of John R. Dillon to serve as director for a new three year term, 280,709 shares were withheld. With respect to the approval of an employee stock purchase plan which is qualified under Section 423 of the Internal Revenue Code of 1986, of the shares represented, 10,813,152 were voted in favor of the AirGate PCS, Inc. 2001 Employee Stock Purchase Plan, 3,342 were voted against the proposal and 5,020 votes were abstentions and broker no-votes. ITEM 5. OTHER INFORMATION INVESTMENT CONSIDERATIONS The following investment considerations update the investment considerations contained in our Annual Report on Form 10-K for the year ended September 30, 2000. RISKS PARTICULAR TO AIRGATE PCS The termination of our affiliation with Sprint PCS or Sprint PCS' failure to perform its obligations under our agreements would severely restrict our ability to conduct our business Our ability to offer Sprint PCS products and services and our PCS network's operation are dependent on our Sprint PCS agreements being renewed and not terminated. Each of these agreements can be terminated for breach of any material terms. We are dependent on Sprint PCS' ability to perform its obligations under the Sprint PCS agreements. The non-renewal or termination of any of the Sprint PCS agreements or the failure of Sprint PCS to perform its obligations under the Sprint PCS agreements would severely restrict our ability to conduct our business. We may not receive as much Sprint PCS roaming revenue in the future because Sprint PCS can change the rate we receive or fewer people may travel in our network area We are paid a fee from Sprint PCS for every minute that a Sprint PCS subscriber based outside of our territory uses our network; we refer to such fees as roaming revenue. Similarly, we pay a fee to Sprint PCS for every minute that our customers use the Sprint PCS network outside of our markets; we refer to such fees as roaming fees. For calendar 2001, Sprint PCS has set the base roaming rate at $0.20 per minute, the same rate utilized in 2000. Roaming revenue will continue to represent a substantial portion of our revenue in the near future. Under our agreements with Sprint PCS, Sprint PCS can change the fee we receive for each Sprint PCS roaming minute or pay for each roaming minute. The change by Sprint PCS in the roaming revenue we are paid could substantially decrease our revenues and net income. In addition, our customers may spend more time in other Sprint PCS coverage areas than Sprint PCS customers from outside our Sprint PCS territory spend in our Sprint PCS territory or may not use our services. As a result, we may not receive a substantial amount of Sprint PCS roaming revenue or we may have to pay more Sprint PCS roaming fees than the roaming revenue we collect. If Sprint PCS does not complete the construction of its nationwide PCS network, we may not be able to attract and retain customers Sprint PCS' network may not provide nationwide coverage to the same extent as its competitors, which could adversely affect our ability to attract and retain customers. Sprint PCS is creating a nationwide PCS network through its own construction efforts and those of its affiliates. Today, Sprint PCS is still constructing its nationwide network and does not offer PCS services, either on its own network or through its roaming agreements, in every city in the United States. Sprint PCS has entered into affiliation agreements similar to ours with companies in other territories pursuant to its nationwide PCS build-out strategy. Our results of operations are dependent on Sprint PCS' national network and, to a lesser extent, on the networks of its other affiliates. Sprint PCS and its affiliate program are subject, to varying degrees, to the economic, administrative, logistical, regulatory and other risks described in other risk factors contained below. Sprint PCS' and its other affiliates' PCS operations may not be successful. We have a limited operating history and if we do not successfully manage our anticipated rapid growth, our operating performance may be adversely impacted We launched commercial operations in January 2000 and have grown our employee base to 372 employees as of December 31, 2000. Our performance as a PCS provider depends on our ability to implement operational and administrative systems, including the training and management of our engineering, marketing and sales personnel. These activities are expected to place demands on our managerial, operational and financial resources. The inability to use Sprint PCS' back-office services and third party vendors' back- office systems could disrupt our business Our operations could be disrupted if Sprint PCS is unable to maintain and expand its back office services such as customer activation, billing and customer care, or to efficiently outsource those services and systems through third party vendors. The rapid expansion of Sprint PCS' business is expected to continue to pose a significant challenge to its internal support systems. Additionally, Sprint PCS has relied on third-party vendors for a significant number of important functions and components of its internal support systems and may continue to rely on these vendors in the future. We depend on Sprint PCS' willingness to continue to offer such services to us and to provide these services at competitive costs. Our Sprint PCS agreements provide that, upon nine months' prior written notice, Sprint PCS may elect to terminate any such service beginning January 1, 2002. If Sprint PCS terminates a service for which we have not developed a cost-effective alternative, our operating costs may increase and may restrict our ability to operate successfully. We have substantial debt that we may not be able to service and a failure to service our debt may result in our lenders controlling our assets Our substantial debt will have a number of important consequences for our operations and our investors, including the following: - - we will have to dedicate a substantial portion of any cash flow from operations to the payment of interest on, and principal of, our debt, which will reduce funds available for other purposes; - - we have a fully-financed business plan, but we may not be able to obtain additional financing for currently unanticipated capital requirements, capital expenditures, working capital requirements and other corporate purposes; - - some of our debt, including our financing from Lucent, will be at variable rates of interest, which could result in higher interest expense in the event of increases in market interest rates; and - - due to the liens on substantially all of our assets and the pledges of stock of our existing and future subsidiaries that secure our senior debt and our senior subordinated discount notes, lenders or holders of our senior subordinated discount notes may control our assets or our subsidiaries' assets in the event of a default. As of December 31, 2000, our outstanding long-term debt totaled $229.1 million. Under our current business plan, we expect to incur substantial additional debt before achieving break-even operating cash flow. Accordingly, we will utilize some portion, if not all, of the $98.0 million of additional available borrowings under our financing from Lucent. If we do not meet all of the conditions required under our Lucent financing documents, we may not be able to draw down all of the funds we anticipate receiving from Lucent and may not be able to fund operating losses and working capital needs As of December 31, 2000, we had borrowed $55.5 million from Lucent. The remaining $98.0 million, a portion of which we expect to borrow in the future, is subject to our meeting all of the conditions specified in the financing documents and, in addition, is subject at each funding date to the following conditions: - - that the representations and warranties in the loan documents are true and correct; and - - the absence of a default under our loan documents. If we do not meet these conditions at each funding date, Lucent may not lend any or all of the remaining amounts, and if other sources of funds are not available, we may not be in a position to meet the operating cash needs of our business. We may have difficulty in obtaining subscriber equipment required in order to attract customers We depend on equipment vendors for an adequate supply of subscriber equipment, including handsets. If the supply of subscriber equipment is inadequate or delayed, we may have difficulty in attracting customers. Conflicts with Sprint PCS may not be resolved in our favor, which could restrict our ability to manage our business and provide Sprint PCS products and services Conflicts between us and Sprint PCS may arise and their resolution may harm our business. For example, Sprint PCS prices its national plans based on its own objectives and could set price levels that may not be economically sufficient for our business. In addition, upon expiration, Sprint PCS could decide to not renew the Sprint PCS agreements which would not be in our best interest or the interest of our stockholders. There may be other conflicts such as the setting of the price we pay for back office services and the focus of Sprint PCS' management and resources. If we fail to pay our debt, our lenders have the option of selling our loans to Sprint PCS, giving Sprint PCS certain rights of a creditor to foreclose on our assets Sprint PCS has contractual rights, triggered by an acceleration of the maturity of our financing from Lucent, pursuant to which Sprint PCS may purchase our obligations to Lucent under the financing and obtain the rights of a senior lender. To the extent Sprint PCS purchases these obligations, Sprint PCS' interests as a creditor could conflict with ours. Sprint PCS' rights as a senior lender would enable it to exercise rights with respect to our assets and continuing relationship with Sprint PCS in a manner not otherwise permitted under our Sprint PCS agreements. Certain provisions of our agreements with Sprint PCS may diminish the valuation of our company Provisions of our Sprint PCS agreements could affect the valuation of our company, thereby, among other things, reducing the market prices of our securities and decreasing our ability to raise additional capital necessary to complete our network build-out. Under our agreements with Sprint PCS, subject to the requirements of applicable law, there are circumstances under which Sprint PCS may purchase our operating assets or capital stock for 72% of the "entire business value" of our company, as defined in our management agreement with Sprint PCS. In addition, Sprint PCS must approve any change of control of our ownership and consent to any assignment of our agreements with Sprint PCS. Sprint PCS also has been granted a right of first refusal if we decide to sell our operating assets. We are also subject to a number of restrictions on the transfer of our business including the prohibition on selling our company or our operating assets to a number of identified and as yet to be identified competitors of Sprint PCS or Sprint. These and other restrictions in our Sprint PCS agreements may limit the saleability and/or reduce the value a buyer may be willing to pay for our business and may operate to reduce the "entire business value" of our company. We may not be able to compete with larger, more established businesses offering similar products and services Our ability to compete depends, in part, on our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including new services that may be introduced, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies by competitors. We compete in our territory with at least four other wireless service providers, each of which have an infrastructure in place and have been operational for a number of years. They have significantly greater financial and technical resources than we do, could offer attractive pricing options and may have a wider variety of handset options. We expect that existing cellular providers will upgrade their systems and provide expanded, digital services to compete with the Sprint PCS products and services that we offer. These wireless providers require their customers to enter into long-term contracts, which may make it more difficult for us to attract customers away from them. Sprint PCS generally does not require its customers to enter into long-term contracts, which may make it easier for other wireless providers to attract Sprint PCS customers away from Sprint PCS. We also compete with several PCS providers and other existing communications companies in our Sprint PCS territory. A number of our cellular and PCS competitors have access to more licensed spectrum than the 10 MHz licensed to Sprint PCS in our Sprint PCS territory. In addition, any competitive difficulties that Sprint PCS may experience could also harm our competitive position and success. The technology we use has limitations and could become obsolete We employ digital wireless communications technology selected by Sprint PCS for its network. Code division multiple access, CDMA, technology is a relatively new technology. CDMA may not provide the advantages expected by Sprint PCS. If another technology becomes the preferred industry standard, we may be at a competitive disadvantage and competitive pressures may require Sprint PCS to change its digital technology which, in turn, may require us to make changes at substantially increased costs. We may not be able to respond to such pressures and implement new technology on a timely basis, or at an acceptable cost. If Sprint PCS customers are not able to roam instantaneously or efficiently onto other wireless networks, prospective customers could be deterred from subscribing for our Sprint PCS services The Sprint PCS network operates at a different frequency and uses or may use a different technology than many analog cellular and other digital systems. To access another provider's analog cellular or digital system outside of the Sprint PCS network, a Sprint PCS customer is required to utilize a dual-band/dual-mode handset compatible with that provider's system. Generally, because dual-band/dual-mode handsets incorporate two radios rather than one, they are more expensive and are larger and heavier than single-band/single-mode handsets. The Sprint PCS network does not allow for call hand-off between the Sprint PCS network and another wireless network, thus requiring a customer to end a call in progress and initiate a new call when leaving the Sprint PCS network and entering another wireless network. In addition, the quality of the service provided by a network provider during a roaming call may not approximate the quality of the service provided by Sprint PCS. The price of a roaming call may not be competitive with prices of other wireless companies for roaming calls, and Sprint PCS customers may not be able to use Sprint PCS advanced features, such as voicemail notification, while roaming. Our territory has limited licensed spectrum, and this may affect the quality of our service, which could impair our ability to attract or retain customers Sprint PCS has licenses covering 10 MHz in our territory. In the future, as our customers in those areas increase in number, this limited licensed spectrum may not be able to accommodate increases in call volume and may lead to increased dropped calls and may limit our ability to offer enhanced services. Non-renewal or revocation by the FCC of the Sprint PCS licenses would significantly harm our business PCS licenses are subject to renewal and revocation. Sprint PCS' licenses in our territory will expire in 2007 but may be renewed for additional ten year terms. There may be opposition to renewal of Sprint PCS' licenses upon their expiration and the Sprint PCS licenses may not be renewed. The FCC has adopted specific standards to apply to PCS license renewals. Failure by Sprint PCS to comply with these standards in our territory could cause revocation or forfeiture of the Sprint PCS licenses for our territory or the imposition of fines on Sprint PCS by the FCC. If we lose the right to install our equipment on wireless towers owned by other carriers or fail to obtain zoning approval for our cell sites, we may have to rebuild our network More than 99% of our cell sites are co-located on facilities shared with one or more wireless providers. We co-locate a large portion of our sites on facilities that are owned by only a few tower companies. If our master collocation agreements with one of those tower companies were to terminate, or if one of those tower companies were otherwise not able to support our use of its tower sites, we would have to find new sites, and if the equipment had already been installed, we might have to rebuild that portion of our network. Some of the cell sites are likely to require us to obtain zoning variances or other local governmental or third party approvals or permits. We may also have to make changes to our radio frequency design as a result of difficulties in the site acquisition process. The loss of the officers and skilled employees who we depend upon to operate our business could reduce our ability to offer Sprint PCS products and services The loss of one or more key officers could impair our ability to offer Sprint PCS products and services. Our business is managed by a small number of executive officers. We believe that our future success will also depend in large part on our continued ability to attract and retain highly qualified technical and management personnel. We believe that there is and will continue to be intense competition for qualified personnel in the PCS equipment and services industry as the PCS market continues to develop. We may not be successful in retaining our key personnel or in attracting and retaining other highly qualified technical and management personnel. We currently have "key man" life insurance for our chief executive officer. We may not achieve or sustain operating profitability or positive cash flow from operating activities We expect to incur significant operating losses and to generate significant negative cash flow from operating activities until the second quarter of fiscal year 2002 while we develop and construct our PCS network and build our customer base. Our operating profitability will depend upon many factors, including, among others, our ability to market our services, achieve our projected market penetration and manage customer turnover rates. If we do not achieve and maintain operating profitability and positive cash flow from operating activities on a timely basis, we may not be able to meet our debt service requirements. Unauthorized use of our Sprint PCS network could disrupt our business We will likely incur costs associated with the unauthorized use of our PCS network, including administrative and capital costs associated with detecting, monitoring and reducing the incidence of fraud. Fraud impacts interconnection costs, capacity costs, administrative costs, fraud prevention costs and payments to other carriers for unbillable fraudulent roaming. Our agreements with Sprint PCS, our certificate of incorporation and our bylaws include provisions that may discourage, delay and/or restrict any sale of our operating assets or common stock to the possible detriment of our stockholders Our agreements with Sprint PCS restrict our ability to sell our operating assets and common stock. Generally, Sprint PCS must approve a change of control of our ownership and consent to any assignment of our agreements with Sprint PCS. The agreements also give Sprint PCS a right of first refusal if we decide to sell our operating assets to a third party. These restrictions, among other things, could discourage, delay or make more difficult any sale of our operating assets or common stock. This could have a material adverse effect on the value of our common stock and could reduce the price of our company in the event of a sale. Provisions of our certificate of incorporation and bylaws could also operate to discourage, delay or make more difficult a change in control of our company. Our certificate of incorporation, which contains a provision acknowledging the terms under the management agreement and a consent and agreement pursuant to which Sprint PCS may buy our operating assets, has been duly authorized and approved by our board of directors and our stockholders. This provision is intended to permit the sale of our operating assets pursuant to the terms of the management agreement or a consent and agreement with our lenders without further stockholder approval. INDUSTRY RISKS Wireless service providers generally experience a high rate of customer turnover which would increase our costs of operations and reduce our revenue Our strategy to reduce customer turnover, commonly known as churn, may not be successful. Our average monthly churn (net of 30 day returns) for the three months ended December 31, 2000 was 2.9%. As a result of customer turnover, we lose the revenue attributable to these customers and increase the costs of establishing and growing our customer base. The rate of customer turnover may be the result of several factors, including network coverage; reliability issues such as blocked calls, dropped calls and handset problems; customer care concerns; non-use of phones; non-use of customer contracts, pricing; and other competitive factors. Wireless providers offering services based on lower cost structures may reduce demand for PCS Other wireless providers enjoy economies of scale that can result in a lower cost structure for providing wireless services. Rapid technological changes and improvements in the telecommunications market could lower other wireless providers' cost structures in the future. These factors could reduce demand for PCS because of competitors' ability to provide other wireless services at a lower price. There is also uncertainty as to the extent of customer demand as well as the extent to which airtime and monthly recurring charges may continue to decline. As a result, our future prospects, those of our industry, and the success of PCS and other competitive services, remain uncertain. Alternative technologies and current uncertainties in the wireless market may reduce demand for PCS Technological advances and industry changes could cause the technology used on our network to become obsolete. We may not be able to respond to such changes and implement new technology on a timely basis, or at an acceptable cost. The wireless telecommunications industry is experiencing significant technological change, as evidenced by the increasing pace of digital upgrades in existing analog wireless systems, evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products and enhancements and changes in end-user requirements and preferences. If we were unable to keep pace with these technological changes or changes in the telecommunications market based on the effects of consolidation from the Telecommunications Act of 1996 or from the uncertainty of future government regulation, the technology used on our network or our current business strategy may become obsolete. In addition, wireless carriers are seeking to implement a new "third generation," or "3G," technology throughout the industry. There can be no assurance that we can implement the new 3G technology successfully on a cost-effective basis. Regulation by government agencies may increase our costs of providing service or require us to change our services, either of which could impair our financial performance The licensing, construction, use, operation, sale and interconnection arrangements of wireless telecommunications systems are regulated to varying degrees by the FCC, the Federal Aviation Administration and, depending on the jurisdiction, state and local regulatory agencies and legislative bodies. Adverse decisions regarding these regulatory requirements could negatively impact our operations and our cost of doing business. Our Sprint PCS agreements reflect an affiliation that the parties believe meets the FCC requirements for licensee control of licensed spectrum. If the FCC were to determine that our Sprint PCS agreements need to be modified to increase the level of licensee control, we have agreed with Sprint PCS to use our best efforts to modify the agreements as necessary to cause the agreements to comply with applicable law and to preserve to the extent possible the economic arrangements set forth in the Sprint PCS agreements. If the Sprint PCS agreements cannot be modified, the Sprint PCS agreements may be terminated pursuant to their terms. Use of hand-held phones may pose health risks, which could result in the reduced use of our services or liability for personal injury claims MEDIA REPORTS HAVE SUGGESTED THAT CERTAIN RADIO FREQUENCY EMISSIONS FROM WIRELESS HANDSETS MAY BE LINKED TO VARIOUS HEALTH PROBLEMS, INCLUDING CANCER, AND MAY INTERFERE WITH VARIOUS ELECTRONIC MEDICAL DEVICES, INCLUDING HEARING AIDS AND PACEMAKERS. CONCERNS OVER RADIO FREQUENCY EMISSIONS MAY DISCOURAGE USE OF WIRELESS HANDSETS OR EXPOSE US TO POTENTIAL LITIGATION. ANY RESULTING DECREASE IN DEMAND FOR OUR SERVICES, OR COSTS OF LITIGATION AND DAMAGE AWARDS, COULD IMPAIR OUR ABILITY TO PROFITABLY OPERATE OUR BUSINESS. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Number description - ------ ------------------- 3.1 Amended and Restated Certificate of Incorporation of AirGate PCS, Inc. (Incorporated by reference to Exhibit 3.1 to the quarterly report on Form 10-Q filed by the company with the Commission on August 14, 2000 for the quarter ended June 30, 2000 (SEC File No.000-27455)) 3.2 Amended and Restated Bylaws of AirGate PCS, Inc. (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.1 Specimen of common stock certificate of AirGate PCS, Inc. (Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.2 Form of warrant issued in units offering (included in Exhibit 10.15) 4.3.1 Form of Weiss, Peck and Greer warrants (Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1/A filed by the company with the Commission on August 9, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.3.2 Form of Lucent Warrants (Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-1/A filed by the company with the Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.3.3 Form of Indenture for senior subordinated discount notes (including form of pledge agreement) (Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-1/A filed by the company with the Commission on September 23, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.4 Form of unit (included in Exhibit 10.15) 10.1.1 Sprint PCS Management Agreement and Addenda I-III thereto between SprintCom, Inc. and AirGate Wireless, L.L.C. (Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.1.2 Addendum IV to Sprint PCS Management Agreement dated August 26, 1999 by and among SprintCom, Inc., Sprint Communications Company, L.P., Sprint Spectrum L.P. and AirGate PCS, Inc. (Incorporated by reference to Exhibit 10.1.2 to the annual report on Form 10-K filed by the company with the Commission on December 18, 2000 for the year ended September 30, 2000. (SEC File No. 27455)) 10.1.3 Addendum V to Sprint PCS Management Agreement dated May 12, 2000 by and among SprintCom, Inc., Sprint Communications Company, L.P. and AirGate PCS, Inc. (Incorporated by reference to Exhibit 10.1.3 to the annual report on Form 10-K filed by the company with the Commission on December 18, 2000 for the year ended September 30, 2000. (SEC File No. 27455)) 10.1.4 Addendum VI to Sprint PCS Management Agreement dated December 8, 2000 by and among SprintCom, Inc., Sprint Communications Company, L.P., Sprint Spectrum, L.P. and AirGate PCS, Inc. 10.2 Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate Wireless, L.L.C. (Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.3 Sprint Spectrum Trademark and Service Mark License Agreement (Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.4 Sprint Trademark and Service Mark License Agreement (Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.5 Master Site Agreement dated August 6, 1998 between AirGate and BellSouth Carolinas PCS, L.P., BellSouth Personal Communications, Inc. and BellSouth Mobility DCS (Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.5.1 Notice to AirGate of an assignment of sublease dated September 20, 1999 between BellSouth Cellular Corp. and Crown Castle South Inc., given pursuant to Section 16(b) of the Master Site Agreement. (Incorporated by reference to Exhibit 10.5.1 to the annual report on Form 10-K filed by the company with the Commission on December 18, 2000 for the year ended September 30, 2000. (SEC File No. 27455)) 10.5.2 Master Tower Space Reservation and License Agreement dated February 19, 1999 between AGW Leasing Company, Inc. and American Tower, L.P. (Incorporated by reference to Exhibit 10.5.2 to the annual report on Form 10-K filed by the company with the Commission on December 18, 2000 for the year ended September 30, 2000. (SEC File No. 27455)) 10.5.3 Master Antenna Site Lease No. J50 dated July 20, 1999 between Pinnacle Towers Inc. and AGW Leasing Company. (Incorporated by reference to Exhibit 10.5.3 to the annual report on Form 10-K filed by the company with the Commission on December 18, 2000 for the year ended September 30, 2000. (SEC File No. 27455)) 10.6.1 Compass Telecom, L.L.C. Construction Management Agreement (Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.6.2 First Amendment to Services Agreement between AirGate PCS, Inc. and COMPASS Telecom Services, L.L.C. dated May 30, 2000 (Incorporated by reference to Exhibit 6.2 to the quarterly report on Form 10-Q filed by the company with the Commission on August 14, 2000 for the quarter ended June 30, 2000 (SEC File No.000-27455)) 10.7 Commercial Real Estate Lease dated August 7, 1998 between AirGate and Perry Company of Columbia, Inc. to lease a warehouse facility (Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1/A filed by the company with the Commission on July 12, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.7.1 Lease Agreement dated August 25, 1999 between Robert W. Bruce, Camperdown Company, Inc. and AGW Leasing Company, Inc. to lease office/warehouse space in Greenville, South Carolina. (Incorporated by reference to Exhibit 10.7.1 to the annual report on Form 10-K filed by the company with the Commission on December 18, 2000 for the year ended September 30, 2000. (SEC File No. 27455)) 10.8.1 Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.9 Employment Agreement dated April 9, 1999 by and between AirGate PCS, Inc. and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1/A filed by the company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.10.1 Form of Executive Employment Agreement (Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1/A filed by the company with the Commission on July 12, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.11 AirGate PCS, Inc. 1999 Stock Option Plan (Incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed by the company with the Commission on April 10, 2000 (SEC File No. 333-34416)) 10.11.1 Form of AirGate PCS, Inc. Option Agreement (Incorporated by reference to Exhibit 10.11.1 to the quarterly report on Form 10-Q filed by the company with the Commission on August 14, 2000 for the quarter ended June 30, 2000 (SEC File No. 000-27455)) 10.11.2 AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan 10.11.3 AirGate PCS, Inc. 2001 Employee Stock Purchase Plan 10.12 Credit Agreement with Lucent (including form of pledge agreement and form of intercreditor agreement) (Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1/A filed by the company with the Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.13 Consent and Agreement (Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1/A filed by the company with the Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.14 Assignment of Sprint PCS Management Agreement, Sprint Spectrum Services Agreement and Trademark and Service Mark Agreement from AirGate Wireless, L.L.C. to AirGate Wireless, Inc. dated November 20, 1998 (Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1/A filed by the company with the Commission on August 9, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.15 Form of Warrant for units offering (including from of warrant in units offering and form of unit) (Incorporated by reference to Exhibit 10.15 to the Registration Statement on Form S-1/A filed by the company with the Commission on September 23, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.16 First Amendment to Employment Agreement dated December 20, 1999 between AirGate PCS, Inc. and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.16 to the quarterly report on Form 10-Q filed by the company with the Commission on May 15, 2000 for the quarter ended March 31, 2000 (SEC File No.000-27455)) 10.17 Retention Bonus Agreement dated May 4, 2000 between AirGate PCS, Inc. and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.17 to the quarterly report on Form 10-Q filed by the company with the Commission on May 15, 2000 for the quarter ended March 31, 2000 (SEC File No.000-27455)) 21 Subsidiaries of AirGate PCS, Inc. (Incorporated by reference to Exhibit 21 to the annual report on Form 10-K filed by the company with the Commission on December 18, 2000 for the year ended September 30, 2000. (SEC File No. 27455)) 27 Financial Data Schedule (b) Reports on Form 8-K On November 30, 2000, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission that provided information under Item 9 - Regulation FD Disclosure, which is not incorporated by reference. On February 8, 2001, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission that provided information under Item 9 - Regulation FD Disclosure, which is not incorporated by reference. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned officer thereunto duly authorized. AirGate PCS, Inc. By: /s/ Alan B. Catherall _ -------------------------------- Name: Alan B. Catherall Title: Chief Financial Officer (Duly Authorized Officer) Date: February 14, 2001 /s/ Alan B. Catherall _ ------------------------------- Alan B. Catherall Chief Financial Officer (Principal Financial and Chief Accounting Officer) EX-10.1.4 2 0002.txt ADDENDUM VI TO SPRINT PCS MANAGEMENT AGR ADDENDUM VI TO SPRINT PCS MANAGEMENT AGREEMENT MANAGER: AirGate PCS, Inc. SERVICE AREA: Anderson, SC BTA Asheville-Henderson, NC BTA Augusta, GA BTA Charleston, SC BTA Columbia, SC BTA Florence, SC BTA Goldsboro-Kinston, NC BTA Greenville-Washington, NC BTA Greenville-Spartanburg, SC BTA Greenwood, SC BTA Hickory-Lenoir-Morgantown, NC BTA Jacksonville, NC BTA Myrtle Beach, SC BTA New Bern, NC BTA Orangeburg, SC BTA Roanoke Rapids, NC BTA Rocky Mount-Wilson, NC BTA Savannah, GA BTA Sumter, SC BTA Wilmington, NC BTA Camden County, NC Currituck County, NC Dare County, NC Pasquotank County, NC This Addendum VI (this "Addendum") dated as of December 8, 2000, contains certain additional and supplemental terms and provisions to that certain Sprint PCS Management Agreement entered into as of July 22, 1998 by the same parties as this Addendum, which Management Agreement was further amended by Addendum I entered into as of July 22, 1998, and further amended by Addendum II entered into as of May 24, 1999, Addendum III entered into as of August 2, 1999, Addendum IV entered into as of August 26, 1999, and Addendum V entered into as of May 12, 2000. The terms and provisions of this Addendum control, supersede and amend any conflicting terms and provisions contained in the Management Agreement. Except for express modification made by this Addendum the Management Agreement continues in full force and effect. Capitalized terms used and not otherwise defined in this Addendum have the meanings ascribed to them in the Management Agreement. Section and Exhibit references are to Sections of, and Exhibits to, the Management Agreement, unless otherwise noted. 1. LOCAL TELEPHONE EXCHANGE BUILD-OUT. Section 12 of Addendum I to the Management Agreement is deleted in its entirety. 2. COUNTERPARTS. This Addendum may be signed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Addendum VI to be executed by their respective authorized officers as of the date and year first above written. SPRINTCOM, INC. By: /s/ Thomas E. Mateer ---------------------- Thomas E. Mateer, Vice President - Affiliations SPRINT SPECTRUM L.P. By: /s/ Thomas E. Mateer --------------------- Thomas E. Mateer, Vice President - Affiliations SPRINT COMMUNICATIONS COMPANY L.P. By: /s/ Ed Mattix ---------------------- Ed Mattix, Senior Vice President - Public Affairs AIRGATE PCS, INC. By: /s/ Thomas M. Dougherty ----------------------- Thomas M. Dougherty President and CEO EX-10.11.2 3 0003.txt 2001 NON-EXECUTIVE STOCK OPTION PLAN AIRGATE PCS, INC. 2001 NON-EXECUTIVE STOCK OPTION PLAN _________________________________________________________________ AIRGATE PCS, INC. 2001 NON-EXECUTIVE STOCK OPTION PLAN TABLE OF CONTENTS ARTICLE 1 PURPOSE 1 1.1 General 1 ARTICLE 2 EFFECTIVE DATE 1 2.1 Effective Date 1 ARTICLE 3 DEFINITIONS 1 3.1 Definitions 1 ARTICLE 4 ADMINISTRATION 5 4.1 Administration 5 4.2 Scope of Authority 5 4.3 Decisions Binding 6 ARTICLE 5 SHARES SUBJECT TO THE PLAN 6 5.1 Number of Shares 6 5.2 Replenishment of Shares 6 5.3 Source of Stock 6 ARTICLE 6 ELIGIBILITY 7 6.1 General 7 ARTICLE 7 STOCK OPTIONS 7 7.1 General 7 ARTICLE 8 PROVISIONS APPLICABLE TO AWARDS 8 8.1 Limits on Transfer 8 8.2 Beneficiaries 8 8.3 Stock Certificates 8 8.4 Acceleration for Any Reason 9 8.5 Effect of Acceleration 9 8.6 Termination of Employment 9 ARTICLE 9 CHANGES IN CAPITAL STRUCTURE 9 9.1 General 9 ARTICLE 10 AMENDMENT, MODIFICATION AND TERMINATION 10 10.1 Amendment, Modification and Termination 10 10.2 Awards Previously Granted 10 ARTICLE 11 GENERAL PROVISIONS 10 11.1 No Rights to Awards 10 11.2 No Stockholder Rights 10 11.3 Withholding 10 11.4 No Right to Employment 10 11.5 Unfunded Status of Awards 11 11.6 Relationship to Other Benefits 11 11.7 Expenses 11 11.8 Titles and Headings 11 11.9 Gender and Number 11 11.10 Fractional Shares 11 11.11 Government and Other Regulations 11 11.12 Governing Law 11 11.13 Additional Provisions 11 AIRGATE PCS, INC. 2001 NON-EXECUTIVE STOCK OPTION PLAN ARTICLE IARTICLE 1 PURPOSE ------------------ PURPOSE 1.1 GENERAL1.1 General. The purpose of the AirGate PCS, Inc. 2001 ------- Non-Executive Stock Option Plan (the "Plan") is to promote the success, and enhance the value, of AirGate PCS, Inc. (the "Company"), by linking the personal interests of its employees to those of Company stockholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of employees upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected employees. The Plan is intended to be a "broadly based plan" for purposes of Section 4460(i)(A) of the NASD Manual. No awards shall be granted under the Plan to its Officers or Directors (as defined below). ARTICLE 2ARTICLE 2 EFFECTIVE DATE ------------------------- EFFECTIVE DATE 2.1 EFFECTIVE DATE2.1 Effective Date. The Plan shall be effective -------------- as of the date upon which it shall be approved by the Board (the "Effective Date"). ARTICLE 3ARTICLE 3 DEFINITIONS ---------------------- DEFINITIONS 3.1 DEFINITIONS3.1 Definitions. When a word or phrase appears in ----------- this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context. The following words and phrases shall have the following meanings: (a) "Board" means the Board of Directors of the Company. (b) "Change in Control" means the occurrence of any of the following events: (i) individuals who, on the Effective Date, constitute the Board of Directors of the Company (the "Incumbent Directors") cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board of Directors shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a - ------- director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors ("Election Contest") or other actual or threatened solicitation of proxies or consents by or on behalf of any "person" (such term for purposes of this definition being as defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board of Directors ("Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or (ii) any person is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of either (i) __% or more of the then-outstanding shares of common stock of the Company ("Company Common Stock") or (ii) securities of the Company representing __% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of directors (the "Company Voting Securities"); provided, -------- however, that for purposes of this paragraph (b), the following acquisitions - ------- shall not constitute a Change of Control: (A) an acquisition directly from the - --- Company, (B) an acquisition by the Company or a Subsidiary of the Company, (C) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary of the Company, or (D) an acquisition pursuant to a Non-Qualifying Transaction (as defined in paragraph (c) below); or (iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a "Reorganization"), or the sale or other disposition of all or substantially all of the Company's assets (a "Sale") or the acquisition of assets or stock of another corporation (an "Acquisition"), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individual and entities who were the beneficial owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than __% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Reorganization, Sale or Acquisition (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets or stock either directly or through one or more subsidiaries, the "Surviving Corporation") in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any Subsidiary of the Company, (y) the Surviving Corporation or its ultimate parent corporation, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing is the beneficial owner, directly or indirectly, of __% or more of the total common stock or __% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Corporation, and (C) at least a majority of the members of the board of directors of the Surviving Corporation were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or (iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" means the Compensation Committee of the Board. (e) "Company" means AirGate PCS, Inc., a Delaware corporation, or its successor(s). (f) "Director" shall mean a member of the Board of Directors of the Company. (g) "Disability" of a Participant means a physical or mental inability that causes the Participant to be considered disabled under the disability income plan applicable to such Participant, whether or not such Participant actually receives such disability benefits, or in the event there is no such disability income plan applicable to the Participant, as determined by the Committee. (h) "Effective Date" has the meaning assigned such term in Section 2.1. (i) "Eligible Participant" means an individual who is an employee of the Company or a Parent or Subsidiary, but who is not an Officer or Director and who is not a recipient of options under the Company's 1999 Stock Option Plan or any subsequent plan under which stock options are or may be granted to senior managers of the Company. (j) "Fair Market Value", on any date, means (i) if the Stock is listed on a securities exchange or traded over the Nasdaq National Market, the average of the high and low market prices reported in The Wall Street Journal at which a share of Stock shall have been sold on such day or on the next preceding trading day if such date was not a trading day, or (ii) if the Stock is not listed on a securities exchange or traded over the Nasdaq National Market, the mean between the bid and offered prices as quoted by Nasdaq for such date, provided that if it is determined that the fair market value is not properly reflected by such Nasdaq quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable. (k) "Non-Qualified Stock Option" means an Option that is not intended to meet the requirements of Section 422 of the Code or any successor provision thereto. (l) "NASD" means the National Association of Securities Dealers, Inc. (m) "Officer", when used as a capitalized term, shall mean an "officer" of the Company as defined in Rule 16a-1(f) under the 1934 Act (or such other definition of the term "officer" as the NASD may subsequently adopt for purposes of its "broadly based plan" exemption for the shareholder approval requirements of Section 4460(i)(A) of the NASD Manual). (n) "Option" means a right granted to a Participant under this Plan to purchase Stock at a specified price during specified time periods. Any Option granted under the Plan shall be a Non-Qualified Stock Option. (o) "Option Agreement" means any written agreement, contract, or other instrument or document evidencing an Option. (p) "Parent" means a corporation which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. (q) "Participant" means a an Eligible Participant who has been granted an Option under the Plan. (r) "Plan" means the AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan, as amended from time to time. (s) "Stock" means the $.01 par value common stock of the Company and such other securities of the Company as may be substituted for Stock pursuant to Article 9. (t) "Subsidiary" means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. (u) "1933 Act" means the Securities Act of 1933, as amended from time to time. (v) "1934 Act" means the Securities Exchange Act of 1934, as amended from time to time. ARTICLE 4ARTICLE 4 ADMINISTRATION ------------------------- ADMINISTRATION 4.1 ADMINISTRATION4.1 Administration. The Plan shall be -------------- administered by the Committee. Any authority granted to the Committee may be exercised by the Board. In exercising such authority, the Board shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board. The Committee may delegate its authority under this Plan to one or more committees or to senior managers of the Company, and may authorize further delegation by any such committee to senior managers of the Company, except the right to amend or terminate this Plan. 4.2 SCOPE OF AUTHORITY4.2 Scope of Authority. The Committee shall ------------------ have full power and authority to administer this Plan, to administer and interpret this Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of this Plan as the Committee deems necessary or advisable. The Committee's powers include, but are not limited to, the power to do the following:: (a) Designate Participants; (b) Determine the type or types of Options to be granted to each Participant; (c) Determine the number of Options to be granted and the number of shares of Stock to which an Option will relate; (d) Determine the terms and conditions of any Option granted under the Plan, including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Option, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Option; (e) Prescribe the form of each Option Agreement, which need not be identical for each Participant; (f) Accelerate the vesting, exercisability or lapse of restrictions of any outstanding Option, based in each case on such considerations as the Committee in its sole discretion determines; (g) Decide all other matters that must be determined in connection with an Option; (h) Establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; (i) Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; (j) Amend the Plan or any Option Agreement as provided herein; and (k) Adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or any Parent or Subsidiary may operate, in order to assure the viability of the benefits of Options granted to participants located in such other jurisdictions and to meet the objectives of the Plan; and (l) Delegate its general administrative duties under the Plan to an officer or employee or committee of officers or employees of the Company. 4.3. DECISIONS BINDING4.3 Decisions Binding. The Committee's ------------------ interpretation of the Plan, any Options granted under the Plan, any Option Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. No member of the Committee shall be liable for any act done in good faith. ARTICLE 5ARTICLE 5 SHARES SUBJECT TO THE PLAN ------------------------------------- SHARES SUBJECT TO THE PLAN 5.1. NUMBER OF SHARES5.1 Number of Shares. Subject to adjustment ----------------- as provided in Section 9.1, the aggregate number of shares of Stock reserved and available for Options granted under the Plan shall be 150,000. 5.2. REPLENISHMENT OF SHARES5.2 Replenishment of Shares. To the ------------------------- extent that an Option is canceled, terminates, expires or lapses for any reason, any shares of Stock subject to the Option will again be available for the grant of Options under the Plan. Any shares of Stock delivered to the Company in payment of the exercise price of an Option or in whole or partial satisfaction of tax withholding obligations in connection with the exercise of an Option shall be available for the grant of Options under this Plan. 5.3. SOURCE OF STOCK5.3 Source of Stock. Any Stock distributed ----------------- pursuant to an Option may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market. ARTICLE 6ARTICLE 6 ELIGIBILITY ---------------------- ELIGIBILITY 6.1. GENERAL6.1 General. Options may be granted only to Eligible ------- Participants. ARTICLE 7ARTICLE 7 STOCK OPTIONS ------------------------ STOCK OPTIONS 7.1. GENERAL7.1 General. The Committee is authorized to grant ------- Options to Participants on the following terms and conditions: (a) EXERCISE PRICE. The exercise price per share of Stock under an --------------- Option shall be determined by the Committee, provided that the exercise price for any Option shall not be less than the Fair Market Value as of the date of the grant. (b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time ------------------------------- or times at which an Option may be exercised in whole or in part, subject to Section 7.1(e). The Committee also shall determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested. The Committee may waive any exercise or vesting provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exerciseable or vested at an earlier date. The Committee may permit an arrangement whereby receipt of Stock upon exercise of an Option is delayed until a specified future date. (c) PAYMENT. The Committee shall determine the methods by which the ------- exercise price of an Option may be paid, the form of payment, including, without limitation, cash, shares of Stock, or other property (including "cashless exercise" arrangements or "attestation" of shares previously owned), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants; provided that if shares of Stock are used to pay the exercise price of an Option (either by attestation or actual delivery), such shares must have been held by the Participant for at least six months. Payment of the exercise price of an Option may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Committee. (d) EVIDENCE OF GRANT. All Options shall be evidenced by a written Option ------------------- Agreement between the Company and the Participant, initially in the form attached hereto as Exhibit A. The Option Agreement shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee, and the form of Option Agreement may be modified by the Committee from time to time. (e) EXERCISE TERM. In no event may any Option be exercisable for more than -------------- ten years from the date of its grant. ARTICLE 8ARTICLE 8 PROVISIONS APPLICABLE TO AWARDS ------------------------------------------ PROVISIONS APPLICABLE TO AWARDS 8.1. LIMITS ON TRANSFER8.1 Limits on Transfer. No right or -------------------- interest of a Participant in any Option may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Parent or Subsidiary, or shall be subject to any lien, obligation, or liability of the Participant to any other party other than the Company or a Parent or Subsidiary. No Option shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Option under the Plan; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability is appropriate and desirable, taking into account any factors deemed relevant, including without limitation, any state or federal tax or securities laws or regulations applicable to transferable Options. An Option may be exercised during the lifetime of the Participant only by the Participant or any permitted transferee. 8.2. BENEFICIARIES8.2 Beneficiaries. Notwithstanding Section 8.1, ------------- a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Option upon the Participant's death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Option Agreement applicable to the Participant, except to the extent the Plan and Option Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, the Option may be exercised by the legal representative of the Participant's estate, and payment shall be made to the Participant's estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Company. 8.3. STOCK CERTIFICATES8.3 Stock Certificates. All Stock issuable ------------------ under the Plan is subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock. 8.4. ACCELERATION FOR ANY REASON8.4 Acceleration for Any Reason. ----------------------------- The Committee may in its sole discretion at any time determine that all or a portion of a Participant's Options shall become fully or partially exercisable as of such date as the Committee may, in its sole discretion, declare. The Committee may discriminate among Participants and among Options granted to a Participant in exercising its discretion pursuant to this Section 8.4. 8.5 EFFECT OF ACCELERATION8.5 Effect of Acceleration. If an ------------------------ Option is accelerated, the Committee may, in its sole discretion, provide (i) that the Option will expire after a designated period of time after such acceleration to the extent not then exercised, (ii) that the Option will be settled in cash rather than Stock, (iii) that the Option will be assumed by another party to the transaction giving rise to the acceleration or otherwise be equitably converted in connection with such transaction, or (iv) any combination of the foregoing. The Committee's determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated. 8.6. TERMINATION OF EMPLOYMENT8.6 Termination of Employment. Whether ------------------------- military, government or other service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive. A termination of employment shall not occur in (i) a circumstance in which a Participant transfers from the Company to one of its Parents or Subsidiaries, transfers from a Parent or Subsidiary to the Company, or transfers from one Parent or Subsidiary to another Parent or Subsidiary, or (ii) in the discretion of the Committee as specified prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant's employer from the Company or any Parent or Subsidiary. ARTICLE 9ARTICLE 9 CHANGES IN CAPITAL STRUCTURE --------------------------------------- CHANGES IN CAPITAL STRUCTURE 9.1. GENERAL9.1 General. In the event of a corporate transaction ------- involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the authorization limits under Section 5.1 shall be adjusted proportionately, and the Committee may adjust Options to preserve the benefits or potential benefits of the Options. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Options; (iii) adjustment of the exercise price of outstanding Options; and (iv) any other adjustments that the Committee determines to be equitable. Without limiting the foregoing, in the event a stock dividend or stock split is declared upon the Stock, the authorization limits under Section 5.1 shall be increased proportionately, and the shares of Stock then subject to each Option shall be increased proportionately without any change in the aggregate purchase price therefor. ARTICLE 10ARTICLE 10 AMENDMENT, MODIFICATION AND TERMINATION --------------------------------------------------- AMENDMENT, MODIFICATION AND TERMINATION 10.1. AMENDMENT, MODIFICATION AND TERMINATION10.1 Amendment, ------------------------------------------ Modification and Termination. The Board or the Committee may, at any time and from time to time, amend, modify or terminate the Plan without stockholder or Participant approval; provided, however, that the Board or Committee may condition any amendment or modification on the approval of stockholders of the Company if such approval is necessary or deemed advisable with respect to tax, securities or other applicable laws, policies or regulations. No amendment, modification or termination of the Plan shall adversely affect any Option previously granted under the Plan, without the written consent of the Participant. 10.2 AWARDS PREVIOUSLY GRANTED10.2 Awards Previously Granted. At -------------------------- any time and from time to time, the Committee may amend, modify or terminate any outstanding Option without approval of the Participant; provided, however, that, subject to the terms of the applicable Option Agreement, such amendment, modification or termination shall not, without the Participant's consent, reduce or diminish the value of such Option determined as if the Option had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination. ARTICLE 11ARTICLE 11 GENERAL PROVISIONS ------------------------------ GENERAL PROVISIONS 11.1. NO RIGHTS TO AWARDS11.1 No Rights to Awards. No person ---------------------- shall have any claim to be granted any Option under the Plan, and neither the Company nor the Committee is obligated to treat Participants or eligible Participants uniformly. 11.2. NO STOCKHOLDER RIGHTS11.2 No Stockholder Rights. No Option ---------------------- gives the Participant any of the rights of a stockholder of the Company unless and until shares of Stock are in fact issued to such person in connection with such Option. 11.3. WITHHOLDING11.3 Withholding. The Company or any Parent or ----------- Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Option is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by withholding from the Option shares of Stock having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Secretary of the Company establishes. 11.4. NO RIGHT TO EMPLOYMENT11.4 No Right to Employment. Nothing ----------------------- in the Plan or any Option Agreement shall interfere with or limit in any way the right of the Company or any Parent or Subsidiary to terminate any Participant's employment, nor confer upon any Participant any right to continue as an employee of the Company or any Parent or Subsidiary. l1.5. UNFUNDED STATUS OF AWARDS11.5 Unfunded Status of Awards. ---------------------------- The Plan is intended to be an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Option, nothing contained in the Plan or any Option Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Parent or Subsidiary. 11.6. RELATIONSHIP TO OTHER BENEFITS11.6 Relationship to Other --------------------------------- Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Parent or Subsidiary unless provided otherwise in such other plan. 11.7. EXPENSES11.7 Expenses. The expenses of administering the -------- Plan shall be borne by the Company and its Parents or Subsidiaries. 11.8. TITLES AND HEADINGS11.8 Titles and Headings. The titles and ------------------- headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. 11.9. GENDER AND NUMBER11.9 Gender and Number. Except where ------------------- otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 11.10. FRACTIONAL SHARES11.10 Fractional Shares. No fractional ------------------ shares of Stock shall be issued and the Committee shall determine, in its discretion, whether such fractional shares shall be disregarded or eliminated by rounding up. 11.11. GOVERNMENT AND OTHER REGULATIONS11.11 Government and Other --------------------------------- Regulations. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register under the 1933 Act, or any state securities act, any of the shares of Stock issued in connection with the Plan. The shares issued in connection with the Plan may in certain circumstances be exempt from registration under the 1933 Act, and the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. 11.12. GOVERNING LAW11.12 Governing Law. To the extent not -------------- - governed by federal law, the Plan and all Option Agreements shall be construed in accordance with and governed by the laws of the State of Delaware. 11.13. ADDITIONAL PROVISIONS11.13 Additional Provisions. Each ---------------------- Option Agreement may contain such other terms and conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent with the provisions of this Plan. The foregoing is hereby acknowledged as being the AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan as adopted by the Board of Directors of the Company on January 30, 2001. AIRGATE PCS, INC. By: /s/ Barbara Blackford --------------------- Its: General Counsel -------------------- EX-10.11.3 4 0004.txt 2001 EMPLOYEE STOCK PURCHASE PLAN AIRGATE PCS, INC. 2001 EMPLOYEE STOCK PURCHASE PLAN TABLE OF CONTENTS ARTICLE I - BACKGROUND 1 1.1 Establishment of the Plan 1 1.2 Applicability of the Plan 1 1.3 Purpose 1 ARTICLE II - DEFINITIONS 1 2.1 Administrator 1 2.2 Board 1 2.3 Code 1 2.4 Committee 1 2.5 Common Stock 2 2.6 Compensation 2 2.7 Contribution Account 2 2.8 Corporation 2 2.9 Direct Registration System 2 2.10 Effective Date 2 2.11 Eligible Employee 2 2.12 Employee 2 2.13 Employer 3 2.14 Fair Market Value 3 2.15 Offering Date 3 2.16 Offering Period 3 2.17 Option 3 2.18 Participant 3 2.19 Plan 3 2.20 Purchase Date 3 2.21 Purchase Price 3 2.22 Request Form 3 2.23 Stock Account 4 2.24 Subsidiary 4 2.25 Trading Date 4 ARTICLE III - ELIGIBILITY AND PARTICIPATION 4 3.1 Eligibility 4 3.2 Initial Participation 4 3.3 Leave of Absence 5 ARTICLE IV - STOCK AVAILABLE 5 4.1 In General 5 4.2 Adjustment in Event of Changes in Capitalization 5 4.3 Dissolution or Liquidation 6 4.4 Merger or Asset Sale 6 ARTICLE V. - OPTION PROVISIONS 6 5.1 Purchase Price 6 5.2 Calendar Year $25,000 Limit 7 5.3 Offering Period Limit 7 ARTICLE VI - PURCHASING COMMON STOCK 7 6.1 Participant's Contribution Account 7 6.2 Payroll Deductions, Dividends 7 6.3 Discontinuance 8 6.4 Leave of Absence; Transfer of Ineligible Status 8 6.5 Automatic Exercise 8 6.6 Listing, Registration, and Qualification of Shares 9 ARTICLE VII - WITHDRAWALS, DISTRIBUTIONS 9 7.1 Discontinuance of Deductions; Leave of Absence; Transfer to Ineligible Status 9 7.2 In-Service Withdrawals 10 7.3 Termination of Employment for Reasons Other Than Death 10 7.4 Death 10 7.5 Registration 10 ARTICLE VIII - AMENDMENT AND TERMINATION 11 8.1 Amendment 11 8.2 Termination 11 ARTICLE IX - MISCELLANEOUS 11 9.1 Employment Rights 11 9.2 Tax Withholding 12 9.3 Rights Not Transferable 12 9.4 No Repurchase of Stock by Corporation 12 9.5 Governing Law 12 9.6 Stockholder Approval; Registration 12 AIRGATE PCS, INC. 2001 EMPLOYEE STOCK PURCHASE PLAN ARTICLE I BACKGROUNDARTICLE I - BACKGROUND 1.1 ESTABLISHMENT OF THE PLAN.1.1 Establishment of the Plan AirGate PCS, Inc. (the "Corporation") hereby establishes a stock purchase plan to be known as the "AirGate PCS, Inc. 2001 Employee Stock Purchase Plan" (the "Plan"), as set forth in this document. The Plan is intended to be a qualified employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended, and the regulations and rulings thereunder. 1.2 APPLICABILITY OF THE PLAN.1.2 Applicability of the Plan The provisions of this Plan are applicable only to certain individuals who, on or after the Effective Date (as defined herein), are employees of the Corporation and its Subsidiaries participating in the Plan. The Committee shall indicate from time to time which of its Subsidiaries, if any, are participating in the Plan. 1.3 PURPOSE.1.3 Purpose The purpose of the Plan is to enhance the proprietary interest among the employees of the Corporation and its participating subsidiaries through ownership of Common Stock of the Corporation. ARTICLE II DEFINITIONSARTICLE II - DEFINITIONS Whenever capitalized in this document, the following terms shall have the respective meanings set forth below. 2.1 ADMINISTRATOR.2.1 Administrator Administrator shall mean the person or persons (who may be officers or employees of the Corporation) selected by the Committee to operate the Plan, perform day-to-day administration of the Plan, and maintain records of the Plan. 2.2 BOARD.2.2 Board Board shall mean the Board of Directors of the Corporation. 2.3 CODE.2.3 Code Code shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder. 2.4 COMMITTEE.2.4 Committee Committee shall mean a committee which consists of members of the Board and which has been designated by the Board to have the general responsibility for the administration of the Plan. Unless otherwise designated by the Board, the Compensation Committee of the Board of Directors of the Corporation shall serve as the Committee administering the Plan. Subject to the express provisions of the Plan, the Committee shall have plenary authority in its sole and absolute discretion to interpret and construe any and all provisions of the Plan, to adopt rules and regulations for administering the Plan, and to make all other determinations necessary or advisable for administering the Plan. The Committee's determinations on the foregoing matters shall be conclusive and binding upon all persons. 2.5 COMMON STOCK.2.5 Common Stock Common Stock shall mean the common stock, par value $0.01, of the Corporation. 2.6 COMPENSATION.2.6 Compensation Compensation shall mean, for any Participant, for any Offering Period, the Participant's gross wages for the respective period, including without limitation salary, bonus, and commission, but subject to appropriate adjustments that would exclude items such as non-cash compensation and reimbursement of moving, travel, trade or business expenses. 2.7 CONTRIBUTION ACCOUNT.2.7 Contribution Account Contribution Account shall mean the bookkeeping account established by the Administrator on behalf of each Participant, which shall be credited with the amounts deducted from the Participant's Compensation pursuant to Article VI. The Administrator shall establish a separate Contribution Account for each Participant for each Offering Period. 2.8 CORPORATION.2.8 Corporation Corporation shall mean AirGate PCS, Inc., a Delaware corporation. 2.9 DIRECT REGISTRATION SYSTEM.2.9 Direct Registration System Direct Registration System shall mean a direct registration system approved by the Securities and Exchange Commission and by the Nasdaq National Market or any securities exchange on which the Common Stock is then listed, whereby shares of Common Stock may be registered in the holder's name in book-entry form on the books of the Corporation. 2.10 EFFECTIVE DATE.2.10 Effective Date Effective Date shall mean the effective date of the Plan, which shall be the later to occur of (i) the date the Plan is approved by the stockholders of the Corporation, or (ii) the effective date of the Corporation's registration statement on Form S-8 filed under the Securities Act of 1933, as amended, covering the shares to be issued under the Plan. 2.11 ELIGIBLE EMPLOYEE.2.11 Eligible Employee An Employee eligible to participate in the Plan pursuant to Section 3.1. 2.12 EMPLOYEE.2.12 Employee Employee shall mean an individual employed by an Employer who meets the employment relationship described in Treasury Regulation Sections 1.423-2(b) and Section 1.421-7(h). 2.13 EMPLOYER.2.13 Employer Employer shall mean the Corporation and any Subsidiary designated by the Committee as an employer participating in the Plan. 2.14 FAIR MARKET VALUE.2.14 Fair Market Value Fair Market Value of a share of Common Stock, as of any designated date, shall mean the closing sales price of the Common Stock on the Nasdaq National Market on such date or on the last previous date on which such stock was traded. 2.15 OFFERING DATE.2.15 Offering Date Offering Date shall mean the first Trading Date of each Offering Period. 2.16 OFFERING PERIOD.2.16 Offering Period Offering Period shall mean the period of time during which offers to purchase Common Stock are outstanding under the Plan. The Committee shall determine the length of each Offering Period, which need not be uniform; provided that that no Offering Period shall exceed twenty-four (24) months in length. Until specified otherwise by the Committee, the Offering Periods will be the 12-month periods beginning January 1 of each year, but the initial Offering Period shall be the period beginning on the Effective Date and ending on December 31, 2001. No payroll deductions shall be taken until the Effective Date. 2.17 OPTION.2.17 Option Option shall mean the option to purchase Common Stock granted under the Plan on each Offering Date. 2.18 PARTICIPANT.2.18 Participant Participant shall mean any Eligible Employee who has elected to participate in the Plan under Section 3.2. 2.19 PLAN.2.19 Plan Plan shall mean the AirGate PCS, Inc. 2001 Employee Stock Purchase Plan, as amended and in effect from time to time. 2.20 PURCHASE DATE.2.20 Purchase Date Purchase Date shall mean the last Trading Date of each Offering Period. 2.21 PURCHASE PRICE.2.21 Purchase Price Purchase Price shall mean the purchase price of Common Stock determined under Section 5.1. 2.22 REQUEST FORM.2.22 Request Form Request Form shall mean an Employee's authorization either in writing on a form approved by the Administrator or through electronic communication approved by the Administrator which specifies the Employee's payroll deduction in accordance with Section 6.2, and contains such other terms and provisions as may be required by the Administrator. 2.23 STOCK ACCOUNT.2.23 Stock Account Stock Account shall mean the account established by the Administrator on behalf of each Participant, which shall be credited with shares of Common Stock purchased pursuant to the Plan and dividends thereon until distributed in accordance with the terms of the Plan. 2.24 SUBSIDIARY.2.24 Subsidiary Subsidiary shall mean any present or future corporation which is a "subsidiary corporation" of the Corporation as defined in Code Section 424(f). 2.25 TRADING DATE.2.25 Trading Date Trading Date shall mean a date on which shares of Common Stock are traded on the Nasdaq National Market. Except when otherwise indicated by the context, the definition of any term herein in the singular may also include the plural. ARTICLE III ELIGIBILITY AND PARTICIPATIONARTICLE III - ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY.3.1 Eligibility Each Employee who is an Employee regularly scheduled to work at least 20 hours each week and at least five months each calendar year shall be eligible to participate in the Plan as of the later of: (a) the Offering Date immediately following the Employee's last date of hire by an Employer; or (b) the Effective Date. On each Offering Date, Options will automatically be granted to all Employees then eligible to participate in the Plan; provided, however, that no Employee shall be granted an Option for an Offering Period if, immediately after the grant, the Employee would own stock, and/or hold outstanding options to purchase stock, possessing five percent or more of the total combined voting power or value of all classes of stock of the Corporation or any Subsidiary. For purposes of this Section, the attribution rules of Code Section 424(d) shall apply in determining stock ownership of any Employee. If an Employee is granted an Option for an Offering Period and such Employee does not participate in the Plan for such Offering Period, such Option will be deemed never to have been granted for purposes of applying the $25,000 annual limitation described in Section 5.2. 3.2 INITIAL PARTICIPATION.3.2 Initial Participation An Eligible Employee having been granted an Option under Section 3.1 may submit a Request Form to the Administrator to participate in the Plan for an Offering Period. The Request Form shall authorize a regular payroll deduction from the Employee's Compensation for the Offering Period, subject to the limits and procedures described in Article VI. A Participant's Request Form authorizing a regular payroll deduction shall remain effective from Offering Period to Offering Period until amended or canceled under Section 6.3. 3.3 LEAVE OF ABSENCE.3.3 Leave of Absence For purposes of Section 3.1, an individual on a leave of absence from an Employer shall be deemed to be an Employee for the first 90 days of such leave, or for such longer period of time that his or her entitlement to return to work is protected by statute or agreement with the Employer, if applicable. For purposes of this Plan, such individual's employment with the Employer shall be deemed to terminate at the close of business on the 90th day of the leave, unless the individual has returned to regular employment with an Employer before the close of business on such 90th day or his entitlement to return to work is protected by statute or agreement with the employer. Termination of any individual's leave of absence by an Employer, other than on account of a return to employment with an Employer, shall be deemed to terminate an individual's employment with the Employer for all purposes of the Plan. ARTICLE IV STOCK AVAILABLEARTICLE IV - STOCK AVAILABLE 4.1 IN GENERAL.4.1 In General Subject to the adjustments in Sections 4.2 and 4.3, an aggregate of 200,000 shares of Common Stock shall be available for purchase by Participants pursuant to the provisions of the Plan. These shares may be authorized and unissued shares or may be shares issued and subsequently acquired by the Corporation. If an Option under the Plan expires or terminates for any reason without having been exercised in whole or part, the shares subject to such Option that are not purchased shall again be available for subsequent Option grants under the Plan. If the total number of shares of Common Stock for which Options are exercised on any Purchase Date exceeds the maximum number of shares then available under the Plan, the Committee shall make a pro rata allocation of the shares available in as nearly a uniform manner as shall be practicable and as it shall determine to be equitable; and the balance of the cash credited to Participants' Contribution Accounts shall be distributed to the Participants as soon as practicable. 4.2 ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION. 4.2 Adjustment in Event of Changes in Capitalization In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Corporation's capitalization, or other distribution with respect to holders of the Corporation's Common Stock other than normal cash dividends, an automatic adjustment shall be made in the number and kind of shares as to which outstanding Options or portions thereof then unexercised shall be exercisable and in the available shares set forth in Section 4.1, so that the proportionate interest of the Participants shall be maintained as before the occurrence of such event. This adjustment in outstanding Options shall be made without change in the total price applicable to the unexercised portion of such Options and with a corresponding adjustment in the Purchase Price per share; provided, however, that in no event shall any adjustment be made that would cause any Option to fail to qualify as an option pursuant to an employee stock purchase plan within the meaning of Section 423 of the Code. 4.3 DISSOLUTION OR LIQUIDATION.4.3 Dissolution or Liquidation In the event of a proposed dissolution or liquidation of the Corporation, the Offering Period then in progress shall be shortened by setting a new Purchase Date (the "New Purchase Date"), and shall terminate immediately prior to the consummation of the dissolution or liquidation, unless otherwise provided by the Committee. The Corporation shall notify each Participant, at least ten (10) business days prior to the New Purchase Date, that the Purchase Date has been changed to the New Purchase Date and that the Participant's Option shall be exercised automatically on the New Purchase Date, unless the Participant has withdrawn from the Offering Period, as provided in Section 6.3 hereof, prior to the New Purchase Date. 4.4 MERGER OR ASSET SALE.4.4 Merger or Asset Sale In the event of a reorganization, merger, or consolidation of the Corporation with one or more corporations in which the Corporation is not the surviving corporation (or survives as a direct or indirect subsidiary of other such other constituent corporation or its parent), or upon a sale of substantially all of the property or stock of the Corporation to another corporation, then, in the discretion of the Board or the Committee, (i) each outstanding Option shall be assumed, or an equivalent option substituted, by the successor corporation or its parent, or (ii) the Offering Period then in progress shall be shortened by setting a New Purchase Date, which shall be before the date of the proposed transaction. If the Committee sets a New Purchase Date, the Corporation shall notify each Participant, at least ten (10) business days prior to the New Purchase Date, that the Purchase Date has been changed to the New Purchase Date and that the Participant's Option shall be exercised automatically on the New Purchase Date, unless the Participant has withdrawn from the Offering Period, as provided in Section 6.3 hereof, prior to the New Purchase Date. In lieu of the foregoing, the Committee may terminate the Plan in accordance with Section 8.2. ARTICLE V OPTION PROVISIONSARTICLE V. - OPTION PROVISIONS 5.1 PURCHASE PRICE.5.1 Purchase Price The Purchase Price of a share of Common Stock purchased for a Participant pursuant to each exercise of an Option shall be the lesser of: (a) 85 percent of the Fair Market Value of a share of Common Stock on the Offering Date; or (b) 85 percent of the Fair Market Value of a share of Common Stock on the Purchase Date. 5.2 CALENDAR YEAR $25,000 LIMIT.5.2 Calendar Year $25,000 Limit Notwithstanding anything else contained herein, no Employee may be granted an Option for any Offering Period which permits such Employee's rights to purchase Common Stock under this Plan and any other qualified employee stock purchase plan (within the meaning of Code Section 423) of the Corporation and its Subsidiaries to accrue at a rate which exceeds $25,000 of Fair Market Value of such Common Stock for each calendar year in which an Option is outstanding at any time. For purposes of this Section, Fair Market Value shall be determined as of the Offering Date. 5.3 OFFERING PERIOD LIMIT.5.3 Offering Period Limit Notwithstanding anything else contained herein, the maximum number of shares of Common Stock that an Eligible Employee may purchase in any Offering Period is 2,500 shares. ARTICLE VI PURCHASING COMMON STOCKARTICLE VI - PURCHASING COMMON STOCK 6.1 PARTICIPANT'S CONTRIBUTION ACCOUNT.6.1 Participant's Contribution Account The Administrator shall establish a book account in the name of each Participant for each Offering Period. As discussed in Section 6.2 below, a Participant's payroll deductions shall be credited to the Participant's Contribution Account, without interest, until such cash is withdrawn, distributed, or used to purchase Common Stock as described below. During such time, if any, as the Corporation participates in a Direct Registration System, shares of Common Stock acquired upon exercise of an Option shall be directly registered in the name of the Participant. If the Corporation does not participate in a Direct Registration System, then until distribution is requested by a Participant pursuant to Article VII, stock certificates evidencing the Participant's shares of Common Stock acquired upon exercise of an Option shall be held by the Corporation as the nominee for the Participant. These shares shall be credited to the Participant's Stock Account. Certificates shall be held by the Corporation as nominee for Participants solely as a matter of convenience. A Participant shall have all ownership rights as to the shares credited to his or her Stock Account, and the Corporation shall have no ownership or other rights of any kind with respect to any such certificates or the shares represented thereby. All cash received or held by the Corporation under the Plan may be used by the Corporation for any corporate purpose. The Corporation shall not be obligated to segregate any assets held under the Plan. 6.2 PAYROLL DEDUCTIONS; DIVIDENDS.6.2 Payroll Deductions, Dividends (a) Payroll Deductions. By submitting a Request Form at any time before an Offering Period in accordance with rules adopted by the Committee, an Eligible Employee may authorize a payroll deduction to purchase Common Stock under the Plan for the Offering Period. The payroll deduction shall be effective on the first pay period during the Offering Period commencing after receipt of the Request Form by the Administrator. The payroll deduction shall be in any whole dollar amount or percentage up to a maximum of twenty percent (20%) of such Employee's Compensation payable each pay period, and at any other time an element of Compensation is payable. A Participant's payroll deduction shall not be less than one percent (1%) of such Employee's Compensation payable each payroll period. (b) Dividends. Cash or stock dividends paid on Common Stock which is credited to a Participant's Stock Account as of the dividend payment date shall be credited to the Participant's Stock Account and paid or distributed to the Participant as soon as practicable. 6.3 DISCONTINUANCE.6.3 Discontinuance A Participant may discontinue his or her payroll deductions for an Offering Period by filing a new Request Form with the Administrator. This discontinuance shall be effective on the first pay period commencing at least 15 days after receipt of the Request Form by the Administrator. A Participant who discontinues his or her payroll deductions for an Offering Period may not resume participation in the Plan until the following Offering Period. Any amount held in the Participant's Contribution Account for an Offering Period after the effective date of the discontinuance of his or her payroll deductions will either be refunded or used to purchase Common Stock in accordance with Section 7.1. 6.4 LEAVE OF ABSENCE; TRANSFER TO INELIGIBLE STATUS.6.4 Leave of Absence; Transfer of Ineligible Status If a Participant either begins a leave of absence, is transferred to employment with a Subsidiary not participating in the Plan, or remains employed with an Employer but is no longer eligible to participate in the Plan, the Participant shall cease to be eligible for payroll deductions to his or her Contribution Account pursuant to Section 6.2. The cash standing to the credit of the Participant's Contribution Account shall become subject to the provisions of Section 7.1. If the Participant returns from the leave of absence before being deemed to have ceased employment with the Employer under Section 3.3, or again becomes eligible to participate in the Plan, the Request Form, if any, in effect immediately before the leave of absence or disqualifying change in employment status shall be deemed void and the Participant must again complete a new Request Form to resume participation in the Plan. 6.5 AUTOMATIC EXERCISE.6.5 Automatic Exercise Unless the cash credited to a Participant's Contribution Account is withdrawn or distributed as provided in Article VII, his or her Option shall be deemed to have been exercised automatically on each Purchase Date, for the purchase of the number of full and fractional shares of Common Stock which the cash credited to his or her Contribution Account at that time will purchase at the Purchase Price. Any other cash balance remaining in the Participant's Contribution Account at the end of an Offering Period shall be refunded to the Participant, without interest. The amount of cash that may be used to purchase shares of Common Stock may not exceed the Compensation restrictions set forth in Section 6.2 or the applicable limitations of Sections 5.2.or 5.3. Except as provided in the preceding paragraph, if the cash credited to a Participant's Contribution Account on the Purchase Date exceeds the applicable Compensation restrictions of Section 6.2 or exceeds the amount necessary to purchase the maximum number of shares of Common Stock available during the Offering Period under the applicable limitations of Section 5.2.or Section 5.3, such excess cash shall be refunded to the Participant. Except as provided in the preceding paragraph, the excess cash may not be used to purchase shares of Common Stock nor retained in the Participant's Contribution Account for a future Offering Period. Each Participant shall receive a statement on not less than an annual basis indicating the number of shares credited to his or her Stock Account, if any, under the Plan. 6.6 LISTING, REGISTRATION, AND QUALIFICATION OF SHARES.6.6 Listing, Registration, and Qualification of Shares The granting of Options for, and the sale and delivery of, Common Stock under the Plan shall be subject to the effecting by the Corporation of any listing, registration, or qualification of the shares subject to that Option upon any securities exchange or under any federal or state law, or the obtaining of the consent or approval of any governmental regulatory body deemed necessary or desirable for the issuance or purchase of the shares covered. ARTICLE VII WITHDRAWALS; DISTRIBUTIONSARTICLE VII - WITHDRAWALS, DISTRIBUTIONS 7.1 DISCONTINUANCE OF DEDUCTIONS; LEAVE OF ABSENCE; TRANSFER TO INELIGIBLE STATUS.7.1 Discontinuance of Deductions; Leave of Absence; Transfer to Ineligible Status In the event of a Participant's complete discontinuance of payroll deductions under Section 6.3 or a Participant's leave of absence or transfer to an ineligible status under Section 6.4, the cash balance then standing to the credit of the Participant's Contribution Account shall be-- (a) returned to the Participant, in cash, without interest, as soon as practicable, upon the Participant's written request received by the Administrator at least 30 days before the next Purchase Date; or (b) held under the Plan and used to purchase Common Stock for the Participant under the automatic exercise provisions of Section 6.5. 7.2 IN-SERVICE WITHDRAWALS.7.2 In-Service Withdrawals During such time, if any, as the Corporation participates in a Direct Registration System, shares of Common Stock acquired upon exercise of an Option shall be directly registered in the name of the Participant and the Participant may withdraw certificates in accordance with the applicable terms and conditions of such Direct Registration System. If the Corporation does not participate in a Direct Registration System, a Participant may, while an Employee of the Corporation or any Subsidiary, withdraw certificates for some or all of the shares of Common Stock credited to his or her Stock Account at any time, upon 30 days' written notice to the Administrator. If a Participant requests a distribution of only a portion of the shares of Common Stock credited to his or her Stock Account, the Administrator will distribute the oldest securities held in the Participant's Stock Account first, using a first in-first out methodology. The Administrator may at any time distribute certificates for some or all of the shares of Common Stock credited to a Participant's Stock Account, whether or not the Participant so requests. 7.3 TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN DEATH. 7.3 Termination of Employment for Reasons Other Than Death If a Participant terminates employment with the Corporation and the Subsidiaries for reasons other than death, the cash balance in the Participant's Contribution Account shall be returned to the Participant in cash, without interest, as soon as practicable. Certificates for the shares of Common Stock credited to his or her Stock Account shall be distributed to the Participant as soon as practicable, unless the Corporation then participates in a Direct Registration System, in which case, the Participant shall be entitled to evidence of ownership of such shares in such form as the terms and conditions of such Direct Registration System permit. 7.4 DEATH. 7.4 Death In the event a Participant dies, the cash balance in his or her Contribution Account shall be distributed to the Participant's estate, in cash, without interest, as soon as practicable. Certificates for the shares of Common Stock credited to the Participant's Stock Account shall be distributed to the estate as soon as practicable, unless the Corporation then participates in a Direct Registration System, in which case, the estate shall be entitled to evidence of ownership of such shares in such form as the terms and conditions of such Direct Registration System permit. 7.5 REGISTRATION.7.5 Registration Whether represented in certificate form or by direct registration pursuant to a Direct Registration System, shares of Common Stock acquired upon exercise of an Option shall be directly registered in the name of the Participant or, if the Participant so indicates on the Request Form, (a) in the Participant's name jointly with a member of the Participant's family, with the right of survivorship, (b) in the name of a custodian for the Participant (in the event the Participant is under a legal disability to have stock issued in the Participant's name), (c) in a manner giving effect to the status of such shares as community property, or (d) in street name for the benefit of any of the above with a broker designated by the Participant. No other names may be included in the Common Stock registration. The Corporation shall pay all issue or transfer taxes with respect to the issuance or transfer of shares of such Common Stock, as well as all fees and expenses necessarily incurred by the Corporation in connection with such issuance or transfer. ARTICLE VIII AMENDMENT AND TERMINATIONARTICLE VIII - AMENDMENT AND TERMINATION 8.1 AMENDMENT.8.1 Amendment The Committee shall have the right to amend or modify the Plan, in full or in part, at any time and from time to time; provided, however, that no amendment or modification shall: (a) affect any right or obligation with respect to any grant previously made, unless required by law, or (b) unless previously approved by the stockholders of the Corporation, where such approval is necessary to satisfy federal securities laws, the Code, or rules of any stock exchange on which the Corporation's Common Stock is listed: (1) in any manner materially affect the eligibility requirements set forth in Sections 3.1 and 3.3, or change the definition of Employer as set forth in Section 2.13, or (2) increase the number of shares of Common Stock subject to any options issued to Participants (except as provided in Sections 4.2 and 4.3). 8.2 TERMINATION.8.2 Termination The Committee may terminate the Plan at any time in its sole and absolute discretion. The Plan shall be terminated by the Committee if at any time the number of shares of Common Stock authorized for purposes of the Plan is not sufficient to meet all purchase requirements, except as specified in Section 4.1. Upon termination of the Plan, the Administrator shall give notice thereof to Participants and shall terminate all payroll deductions. Cash balances then credited to Participants' Contribution Accounts shall be distributed as soon as practicable, without interest. ARTICLE IX MISCELLANEOUSARTICLE IX - MISCELLANEOUS 9.1 EMPLOYMENT RIGHTS.9.1 Employment Rights Neither the establishment of the Plan, nor the grant of any Options thereunder, nor the exercise thereof shall be deemed to give to any Employee the right to be retained in the employ of the Corporation or any Subsidiary or to interfere with the right of the Corporation or any Subsidiary to discharge any Employee or otherwise modify the employment relationship at any time. 9.2 TAX WITHHOLDING.9.2 Tax Withholding The Administrator may make appropriate provisions for withholding of federal, state, and local income taxes, and any other taxes, from a Participant's Compensation to the extent the Administrator deems such withholding to be legally required. 9.3 RIGHTS NOT TRANSFERABLE.9.3 Rights Not Transferable Rights and Options granted under this Plan are not transferable by the Participant other than by will or by the laws of descent and distribution and are exercisable only by the Participant during his or her lifetime. 9.4 NO REPURCHASE OF STOCK BY CORPORATION.9.4 No Repurchase of Stock by Corporation The Corporation is under no obligation to repurchase from any Participant any shares of Common Stock acquired under the Plan. 9.5 GOVERNING LAW.9.5 Governing Law The Plan shall be governed by and construed in accordance with the laws of the State of Delaware except to the extent such laws are preempted by the laws of the United States. 9.6 STOCKHOLDER APPROVAL; REGISTRATION.9.6 Stockholder Approval; Registration The Plan was adopted by the Board of Directors of the Corporation on November 15, 2000 to be effective as of the Effective Date, provided that no payroll deductions may begin until a registration statement on Form S-8 filed under the Securities Act of 1933, as amended, covering the shares to be issued under the Plan, has become effective. The Plan is subject to approval by the stockholders of the Corporation within 12 months of approval by the Board of Directors. * * * * * * * * * * * * * * The foregoing is hereby acknowledged as being the AirGate PCS, Inc. 2001 Employee Stock Purchase Plan as adopted by the Board of Directors of the Corporation on November 15, 2001 and approved by the stockholders of the Company on January 30, 2001. AIRGATE PCS, INC. By: /s/ Barbara Blackford --------------------- Its: General Counsel -------------------- EX-27 5 0005.txt FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 AIRGATE PCS, INC. 1000 3-MOS SEP-30-2001 OCT-01-2000 DEC-31-2000 52,465 0 21,169 1,620 3,295 81,525 207,196 (19,667) 280,764 33,540 174,279 0 0 129 16,720 280,764 2,290 21,962 5,072 20,985 28,381 0 7,748 (33,863) 0 (33,863) 0 0 0 (33,863) (2.64) (2.64)
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